Iron ore slides as China suspends construction ahead of military parade

Iron ore futures slid on Thursday after the Chinese government ordered the suspension of construction activity ahead of a military parade in Beijing.

The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) fell 2.94% to 775 yuan ($108.06) a metric ton.

The benchmark September iron ore on the Singapore Exchange was 1.36% lower at $102.1 a ton, as of 0730 GMT.

The military parade to commemorate the end of World War Two will be held on September 3.

“Chinese authorities have ordered the suspension of construction activity in at least 12 provinces before and around the event,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.

“As a result, it’s not surprising to see Shanghai rebar and DCE/SGX iron ore futures experiencing significant sell-offs.”

Meanwhile, China’s demand for construction steel is expected to remain stable in August, supported by the launch of new projects, though recent adverse weather has disrupted construction, Chinese consultancy Mysteel said in a note on Thursday.

Meanwhile, China’s new yuan loans broadly contracted in July for the first time in two decades, indicating weak private sector demand amid trade negotiations with Washington.

It was the first contraction since July 2005 and the largest monthly decline since December 1999. However, improvements in broader credit growth suggest the central bank is in no rush to ease policy.

Other steelmaking ingredients on the DCE slumped, with coking coal and coke down 6.25% and 4.32%, respectively.

China’s coking coal market softened following a buying spree, with end-users stepping up material cost controls, Mysteel said in a separate note.

Steel benchmarks on the Shanghai Futures Exchange fell. Rebar lost 1.82%, hot-rolled coil dipped 1.18%, wire rod slid 1.38% and stainless steel decreased 1.14%.

($1 = 7.1720 Chinese yuan)

(By Lucas Liew; Editing by Subhranshu Sahu and Harikrishnan Nair)