Dalian iron ore tumbled to a three-week low on Thursday, while prices of the steelmaking ingredient were volatile in Singapore, pressured by nagging worries about weak steel demand and rising supply in China.
A record-breaking heatwave gripping several regions in top steel producer China since mid-July has caused power shortages, forcing authorities to ration electricity with residential use prioritized over industrial consumption.
Some steel mills have reportedly been ordered to halt or curb operations and steel demand has also been dampened in the short term, analysts said.
Iron ore’s most-traded January 2023 contract on China’s Dalian Commodity Exchange fell as much as 4 percent to 678 yuan ($99.97) a ton, the lowest since July 27.
On the Singapore Exchange, the front-month September contract was down 0.2 percent at $101.45 a ton.
In the spot market, iron ore bound for China traded at $105 a ton on Wednesday, the lowest since July 25, according to SteelHome consultancy.
“In the short term, the demand side has been suppressed due to high temperatures and power cuts across the country,” Huatai Futures analysts said in a note.
Rebar on the Shanghai Futures Exchange fell 2.1 percent, while hot-rolled coil slumped 2.6 percent. Stainless steel tumbled 3.4 percent.
Other steelmaking ingredients were also under pressure, with Dalian coking coal down 2 percent and coke shedding 3.6 percent.
“Downstream demand of steel mills has not improved, the profit… has shrunk again,” Huatai analysts said. “The willingness of steel mills to resume… and increase production is insufficient.”
Rising steel scrap prices and portside iron ore inventories in China added pressure on iron ore, they said.
Meanwhile, overall sentiment has also been weak amid COVID restrictions, mandated steel output limits, the property sector’s downturn and tensions over the Taiwan Strait, the analysts said. — Reuters
