Dalian iron ore futures dropped 4% in early trade on Monday, extending losses into a third straight session on rising supply while demand remained weak amid a slowdown in construction activity in China.
The most-traded iron ore contract on the Dalian Commodity Exchange, with January 2020 expiry, fell to as low as 704.5 yuan ($101.53) a tonne, its weakest since July 8, from Friday’s 733.50 yuan. It was down 2.8% at 713 yuan as of 0230 GMT.
That added to the 5.4% drop suffered by the iron ore benchmark in the past two sessions amid seasonally weak demand for steel, particularly in the construction sector in China, the world’s top producer of the building and manufacturing material.
“We remain marginally bullish in our overall assessment of supply,” said Hui Heng Tan, analyst at commodities broker Marex Spectron. “Spot supply availability continues to improve as mills remain in de-stocking mode and domestic production picks up.”
Some steel mills have also reduced their iron ore purchases in part due to thin margins.
“Margins took a turn for the worse given weaker steel prices,” Tan said. “This means that the slowdown in steel rates will likely persist.”
Last week’s threat by U.S. President Donald Trump to impose an additional 10% tariff on $300 billion of Chinese imports from Sept. 1, also aggravated concerns over steel demand.
FUNDAMENTALS
* Benchmark spot 62% iron ore for delivery to China SH-CCN-IRNOR62 slid 4.7% to $112.50 a tonne on Friday, based on weekly data tracked by SteelHome consultancy, the lowest since June 18.
* Imported iron ore stockpiles at Chinese ports SH-TOT-IRONINV rose for a third week in a row to 121.05 million tonnes, as of Friday, SteelHome data showed. That was the highest since June 6.
* The most-active construction steel rebar contract on the Shanghai Futures Exchange, with October 2019 expiry, was down 0.3% at 3,792 yuan a tonne.
* Hot-rolled steel, used in cars and home appliances, slipped 0.8% to 3,712 yuan a tonne.
* Other steelmaking materials were higher, with Dalian coking coal up 0.9% at 1,402 yuan a tonne, while coke edged up 0.4% to 2,060 yuan.
* Trump, who was frustrated by the failure to advance the trade agenda during the recent Shanghai talks, had told trade adviser Robert Lighthizer to call China to warn that new tariffs were coming, two people familiar with the matter said on Friday.
Source: Reuters