Benchmark Dalian iron ore futures were set to extend a three-day losing streak on Thursday, on fears that demand for the steelmaking raw material will be hurt further by a bruising US-China trade war.
Trade tensions between the United States and China, the world’s two largest economies, are a significant source of risk for the global economy, with “real spillover effects” for emerging markets, top IMF officials said on Wednesday.
Steel demand in top consumer and producer China is forecast to grow just 1 percent next year, compared with this year’s projected growth of 7.8 percent, according to the World Steel Association, which blamed the ongoing trade conflict.
Global steel demand growth will slow to 1.7 percent in 2020, from a 3.9 percent growth forecast this year, the Belgium-based group said.
“The negative news flow is certainly dragging iron ore prices lower,” said Argonaut Securities’ metals and mining analyst Helen Lau.
Dalian Commodity Exchange’s most-traded iron ore contract, with January 2020 expiry, dropped as much as 3.5 percent to 607 yuan ($85.52) a ton, its lowest since Sept. 2. It was down 2.9 percent by noon break.
On the Singapore Exchange, the front-month November contract was down 1.1 percent at $82.27 a ton, the weakest since late August.
Prices of spot cargoes of benchmark iron ore with 62 percent iron content for delivery to China, fell to $89.50 a ton on Wednesday, also the lowest since Sept. 2, from Tuesday’s $91.50, based on SteelHome consultancy data.
Two of the world’s biggest iron ore miners, Vale SA and Rio Tinto, earlier this week reported higher quarterly output and shipments, sending signals that global production has largely stabilized.
“If iron ore production continues to improve, that is also an additional concern,” said Lau.
In January, a deadly mine tailings dam collapse in Brazil prompted dam and mine shutdowns for safety checks in the country, squeezing global iron ore supply and pushing prices to five-year highs in July.
Some developments, however, offer a silver lining, Lau said, with US President Donald Trump saying he expected to sign the first phase of a trade deal with Chinese President Xi Jinping next month. —Reuters
