Iron ore price falls on China demand concern, muted pre-holiday stockpiling

Iron ore smelter. Stock image.

Iron ore futures ended lower on Tuesday, dragged by diminishing pre-holiday restocking among steelmakers and the gloomy demand outlook in top consumer China, which is struggling with a property crisis and slumping stock market.

The most-traded May iron ore on China’s Dalian Commodity Exchange (DCE) closed daytime trade 0.63% lower at 939 yuan ($130.57) per metric ton, off its morning lows.

The benchmark March iron ore on the Singapore Exchange was 0.75% lower at $125.15 a ton as of 0703 GMT, the lowest since Jan. 18.

There has recently been no drastic change in fundamentals and the ore market is more influenced by the macro market sentiment, analysts at Everbright Futures said in a note.

Putting further downward pressure on the ore market is the muted steel demand due to inclement weather and thinning stockpiling activity ahead of the upcoming week-long Lunar New Year holiday break, starting from Feb. 10.

“With the forthcoming holiday, stockpiling for raw materials among steel mills has basically ended. Market activity will be at standstill,” analysts at consultancy Shanghai Metals Market said in a research note.

The persistent weakness came despite more distressed property developers in China having had projects added to local authorities’ so-called whitelists, reflecting the rapid expansion of a government policy aimed at injecting liquidity into the crisis-hit sector.

But banks’ reluctance to lend to the sector is a major obstacle for distressed developers most in need of funds.

Other steelmaking ingredients on the DCE were mixed, with coking coal up 0.18% while coke inched down 0.32%.

Steel benchmarks on the Shanghai Futures Exchange were mostly down.

Rebar was largely unchanged, hot-rolled coil dropped 0.18%, stainless steel lost 0.29% while wire rod added 0.69%.

“Steel demand has almost stagnated amid the inclement weather that has hit many regions across China. Also, steel stocks have accelerated the pace of picking up, weighing down sentiment,” Everbright’s analysts said.

($1 = 7.1917 Chinese yuan)

(By Cassandra Yap and Amy Lv; Editing by Mrigank Dhaniwala)

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