Iron ore futures prices declined on Monday as investors and traders liquidated long positions to capitalize on profits amid concerns over faltering consumption in top consumer China and rising global shipments.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) ended the day’s trading session 1.1% lower at 899 yuan ($124.10) per metric ton. The benchmark June iron ore on the Singapore Exchange also fell 1.16% to $119.4 per ton as of 0706 GMT.
Analysts attributed the price drop to a seasonally slowing demand for steel products in China, which is expected to weigh on iron ore consumption. The hot weather typically leads to a decline in construction activity, reducing steel demand.
Furthermore, global iron ore shipments climbed 8.4% week-on-week to around 33.27 million tons in the May 20-26 period, according to data from consultancy Mysteel. The high supply levels added to the downward pressure on iron ore prices.
Sentiment was also dampened by the steel industry in China reporting a loss of 22.22 billion yuan in the first four months, even as the country’s industrial profits swung back into positive territory in April, as per data from the National Bureau of Statistics.
Other steelmaking ingredients, such as coking coal and coke, also declined on the DCE, while most steel benchmarks on the Shanghai Futures Exchange fell due to the lower raw materials prices and slowing downstream demand.
Analysts at Everbright Futures noted that steel demand has somewhat receded, with transaction volumes falling and destocking slowing down, further contributing to the downward pressure on iron ore prices.