Iron ore futures have tumbled to a two-month low, weighed down by lingering weak fundamentals and concerns over demand prospects in top consumer China. The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) closed the daytime trade 4.16% lower at 806 yuan ($111.12) per metric ton, the lowest level since April 10. The benchmark July iron ore on the Singapore Exchange also fell 1.57% to $103.75 per ton, the lowest since April 8.
Analysts at Sinosteel Futures attributed the decline to rising iron ore supply and softening demand, with high portside inventory weighing on the market. Jinrui Futures analysts further noted that the Chinese government’s latest carbon emission plan for the steel sector could lead to a reduction of 46 million tons in hot metal output in 2024, forecasting daily hot metal output at 2.27 million tons from June to December.
The state planner in China issued a special action plan last Friday, aiming to reduce carbon dioxide (CO2) emissions in the steel sector by about 53 million tons between 2024 and 2025. This policy move has added to the concerns over weakening steel demand in the country.
Furthermore, the skepticism surrounding the effectiveness of various property stimulus measures in China has also put pressure on iron ore prices. Analysts and developers believe that the government’s efforts to clear massive inventory by turning unsold homes into affordable housing are unlikely to significantly help cash-strapped developers due to the program’s limited size and potentially low prices.
Other steelmaking ingredients on the DCE, such as coking coal and coke, also fell, adding to the bearish sentiment in the iron ore market.
The plunge in iron ore prices to a two-month low reflects the lingering concerns over China’s demand prospects, the impact of the government’s carbon emission policies, and the limited effectiveness of the property market stimulus measures, all of which are weighing heavily on the iron ore market.