Iron ore futures prices declined on Monday, weighed down by weak industrial data from top consumer China and the completion of pre-holiday restocking by Chinese steelmakers ahead of the May Day holiday.
The most-traded September iron ore contract on the Dalian Commodity Exchange (DCE) fell by 0.51% to close at 874.50 yuan ($120.69) per metric ton, despite having gained more than 14% so far this month. The benchmark May iron ore contract on the Singapore Exchange also decreased by 0.55% to $117.20 per ton.
The decline in iron ore prices came after China’s industrial profits fell in March and slowed gains for the quarter compared to the first two months, according to official data. This raised concerns about the strength of the recovery in the world’s second-largest economy.
Analysts at Huatai Futures noted that while both iron ore supply and stocks remain at relatively high levels, the fundamentals for iron ore are weaker compared to coking coal, which has low output and stocks.
A research note from CICC analysts also suggested that daily hot metal output is likely to rise above 2.3 million tons in the second quarter, which may not be enough to digest the significant increase in portside iron ore stocks built up in the first quarter.
Most steel benchmarks on the Shanghai Futures Exchange also registered declines, with hot-rolled coil, wire rod, and stainless steel all seeing negative movements. Only rebar prices saw a slight increase of 0.14%.
Analysts at First Futures noted that a rapid increase in hot metal output is unlikely to support a sustainable price rebound, as the persistent destocking of steel products has already been priced in.
Overall, the combination of weak Chinese industrial data and the completion of pre-holiday restocking by steelmakers has led to a retreat in iron ore prices, despite the metal’s recent gains.