Iron Ore Plunges Most Since 2022 As Inventories Pile Up In China
The steelmaking material has tumbled by around a quarter from a peak in early January.
(Bloomberg) -- Iron ore slumped more than 7% — dropping below the $110 a ton mark — after disappointing demand in China left the market lumbered with swelling inventories.
Iron ore has tumbled by around a quarter from a peak in early January as China’s real estate and manufacturing activity remained under pressure. The annual National People’s Congress in Beijing, which concluded Monday, offered few prospects of a demand boost, and iron ore stockpiles at ports have ballooned to the highest in a year.
The plunge in the steelmaking ingredient was the most since mid-2022 on an intraday basis, and it was headed for the lowest close since August last year.
Construction activity remains lackluster as China’s years-long crackdown on property debt squeezes a vital source of steel demand, while Beijing has refrained from deploying the type of massive infrastructure stimulus that it has used in the past. There had been hopes for a stronger pick-up in construction after the Lunar New Year holiday that ended in mid-February, but that hasn’t materialized.
The longer-term outlook is also looking shaky, as supply is eventually set to be boosted by a massive new iron ore mine in Guinea, while Chinese steel mills will become less dependent on mined ores as the country starts to develop larger volumes of steel scrap, according to Tom Price, senior commodities analyst at Liberum.
“It’s hard to build a bullish case for iron ore over any time horizon at the moment,” Price said by phone by from London. “There’s probably a speculative element at work today, with investors looking at what it will take for China to hit its growth targets for the year, and deciding that it’s just not going to happen.”
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Over the weekend, Beijing reiterated its stance that homes are for residents to live in, and not for speculation, keeping to its longstanding position even as a property crisis weighs on demand. This clarification came after Premier Li Qiang’s government work report draft omitted the slogan “housing is for living in, not speculation” for the first time since 2019.
Singapore iron ore futures fell as much as 7.3% to $106.80 a ton and were trading at $107.20 as of 11:43 a.m. in London. Futures in Dalian closed 5.3% lower, while steel contracts in Shanghai were also down. Non-ferrous metals edged higher on the London Metal Exchange, with copper adding 0.4% and zinc climbing 0.7%.
--With assistance from Mark Burton.
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