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Iron ore price on track for fifth weekly fall on demand worries

Shanghai construction. Wikimedia Commons

The iron ore price was on track for a fifth straight weekly fall on Friday, as worries over weak demand in China outweighed hopes for an easing of financing curbs in the country’s debt-laden property sector.

The most-traded iron ore for January delivery on China’s Dalian Commodity Exchange ended daytime trading 1.6% lower at 546.50 yuan ($85.48) a tonne and was on track for a weekly loss of nearly 3%.

Traders turned cautious after a relief rally in China’s ferrous futures markets on Thursday, driven by China’s Evergrande Group making a last-minute coupon payment to some bondholders and talks of a potential credit easing in the property sector. The sector accounts for about a quarter of domestic steel demand.

“The question is more on implementation details,” analysts at J.P. Morgan said in a note, referring to the potential credit-easing measures.

Still, China will stand firm on policies to curb excess borrowing by property developers even as it makes financing tweaks to help home buyers and meet “reasonable” demand amid an industry-wide liquidity crunch, say bankers and analysts.

Adding to the downbeat outlook for China’s steel and iron ore demand, ArcelorMittal said it expects a slight contraction in Chinese steel demand in 2021, citing the country’s real estate sector.

This week, Fitch Solutions said the iron ore price rally has ended with prices dropped to levels below what the market analyst had forecasted.

Fitch has revised down its price forecast from $170/tonne in 2021 and $130/tonne in 2022 to $155/tonne and $110/tonne, respectively.

“While China’s energy crunch has started to ease and production curbs on steel are also being lifted gradually, we do not expect the strong demand impact that had stemmed from stimulus to return in 2022 as construction projects reach completion and the pipeline of new projects lessens, with the Chinese Government focusing on tightening credit lines.”

(With files from Reuters and Bloomberg)