BY Onome Amuge.
Iron ore futures tumbled below $100 a tonne at the closing session of the week over a decline in demand for steel in China after data showed economic growth contracted sharply in the second quarter due to Covid-19 restrictions.
The most traded iron ore for September delivery on China’s Dalian Commodity Exchange plunged 9.1 percent to a session low of 652 yuan or $96.67 a tonne, its weakest since 25 February 2022. The basic ingredient used in the production of steel also suffered a weekly decline of more than 12 percent.
On the Singapore Exchange, the front-month August contract for iron ore shed 2.6 percent to $97.60 a tonne, its lowest since November 2021, falling to a weekly loss of more than 11 percent.
Following the weakness in iron ore demand, China’s crude steel output dropped 3.3 percent in June compared with a year earlier, and was down 6 percent from May.
Though data showed that China’s industrial output was 3.9 percent higher in June from a year earlier, quickening from a 0.7 percent rise in May, several mills in the world’s largest steel consumer reduced blast furnaces or placed them under maintenance earlier than usual due to weak margins and high inventories, and it remains uncertain when these facilities will be restarted.
Also, Chinese steel producers are facing more headwinds with bad weather and recurring Covid-19 curbs, while the crisis in the property sector remains unresolved.
Commenting on China’s lowered steel demand, Atilla Widnell, managing director at Navigate Commodities in Singapore, said Covid-induced lockdowns in conjunction with adverse weather conditions look likely to continue to undermine domestic steel consumption.
Meanwhile, rebar and hot-rolled coil on the Shanghai Futures Exchange both lost 4.9 percent, and stainless steel was down 3.7 percent.
