Iron ore futures slip on weak demand outlook

Iron ore futures extended losses on Wednesday, weighed down by a weak demand outlook.

Market sentiment remained bearish amid rising shipments from major miners and expectations of a seasonal slowdown in steel demand during the summer months. Although blast furnace-based steel mills are maintaining high production levels due to healthy profit margins, helping limit iron ore losses, this could place downward pressure on finished steel prices if demand deteriorates further.

The troubled property sector, once a major steel consumer, shows little sign of recovery, according to analysts. Goldman Sachs projects that annual demand for new homes in Chinese cities will remain below 5 mln units in the coming years, just a quarter of the 2017 peak of 20 mln units.

The steel sector also lacks clear direction in the absence of meaningful stimulus from Beijing. Meanwhile, rising global protectionist policies could threaten China’s steel exports, further dampening market prospects.

On the Dalian Commodity Exchange, the most-traded September iron ore contract fell 0.43pct to 702.5 yuan (USD 97.8) per ton. In contrast, coke and coking coal futures rose 1.46pct and 0.75pct to 1,387.5 yuan (USD 193) and 804.5 yuan (USD 112) per ton, respectively.

On the Shanghai Futures Exchange, rebar futures slipped 0.33pct to 2,976 yuan (USD 415) per ton, HRC fell 0.26pct to 3,098 yuan (USD 432), and wire rod dropped 0.58pct to 3,271 yuan (USD 456). Stainless steel futures, however, gained 1.25pct to 12,540 yuan (USD 1,747) per ton.

1 USD / 7.17 yuan