Iron ore futures in China and Singapore fell on worries of weak demand for the steelmaking raw material as mills are expected to reduce steel output due to growing inventories and new environmental curbs.
Extending its losses into the third straight day, the Dalian Commodity Exchange’s most-traded iron ore contract, expiring in May, shed as much as 3.9 percent to 631 yuan ($89.98) a ton, its lowest since Feb. 17.
Iron ore’s front-month March contract on the Singapore Exchange slumped as much as 2 percent to $84.17 a ton.
Though many workers in China have returned to factories and construction sites after weeks of shutdowns and as travel curbs aimed at containing a coronavirus outbreak have eased, the situation is not expected to normalize anytime soon.
Amid record-high inventories that have piled up because of weak demand, steel mills are reluctant to produce more, hitting demand for iron ore.
“Downstream (commercial steel) demand is weak. The question is how long Chinese steel mills will be willing to maintain production,” said Daniel Hynes, ANZ’s senior commodity strategist, in a note.
“With the promise of infrastructure stimulus measures, they are likely to keep producing for the moment. If there is no rebound in industrial activity by the end of the quarter, we suspect lower steel production and thus iron ore demand will be hit.” — Reuters