Dalian iron ore futures experienced a significant drop on Monday, reaching their lowest point in seven weeks. This decline was primarily driven by concerns over weakened demand in China, the world’s leading consumer of the steelmaking ingredient. Disappointing economic data from China has fuelled worries about the prospects for iron ore demand.
The most actively traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) closed the morning session down by 0.2 per cent, settling at 770 yuan ($US108.04) per tonne. Earlier in the session, it touched a low of 762.50 yuan, a level not seen since September 1. In contrast, the benchmark November iron ore contract on the Singapore Exchange saw a gain of 0.4 per cent, trading at $US104.35 a tonne as of 2.54pm AEDT. This was supported by a weaker US dollar, which makes commodities priced in dollars more affordable for buyers using other currencies.
China’s economic growth is expected to have slowed to a one-year low in the third quarter, impacted by a persistent downturn in the property market and ongoing trade tensions. Key indicators, including property investment and new construction starts, suggest a bleak outlook for steel demand, which has further contributed to the downward pressure on iron ore prices. New home prices in China also fell at the fastest rate in 11 months during September, exacerbating the property sector’s negative impact on the broader economy.
Sluggish demand in the housing sector led to a decline in China’s crude steel output in September, reaching a 21-month low. The persistent challenges in the property market continue to weigh on steel production. Furthermore, steel demand typically slows down in the fourth quarter due to lower temperatures in northern regions, which hinder outdoor construction activities.
