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Iron ore futures declined this week due to persistent weakness in China's property sector, despite gains in steel benchmarks and steelmaking inputs. New home prices continued to fall, while new bank loans rebounded only modestly, showing subdued credit demand. Crude steel output decreased year-on-year, but iron ore recorded a third consecutive weekly gain supported by renewed steel mill activity after environmental production restrictions ended. Domestic construction steel demand is expected to improve slightly, helped by better weather and stronger financial conditions in non-property sectors, while coking coal, coke, and Shanghai Futures Exchange steel benchmarks posted positive movements.
Iron ore futures ended lower this week, pressured by continued weakness in China's property sector, even as steel benchmarks and steelmaking ingredients showed gains. On China's Dalian Commodity Exchange, the most-traded January iron ore contract fell 0.31% to 796 yuan (USD 111.75) per metric ton. On the Singapore Exchange, the September benchmark iron ore dropped 0.28% to USD 105.4 a ton. Advertisement
China's property market continues to face challenges, with new home prices falling 0.3% in August from the previous month, extending a decline that began in May 2023. The slowdown highlights ongoing weak demand in the housing sector. Although new bank loans in China rebounded in August following a surprising contraction in July, the recovery was modest, as low property sector activity and government measures to limit industrial overcapacity kept credit demand under pressure.
Steel production in China also reflected this trend. Crude steel output declined 0.7% year-on-year, and total production over the first eight months of the year fell 2.8% compared with the same period last year. Despite these pressures, iron ore futures had recorded a third consecutive weekly gain last week, supported by renewed activity in steel mills after environmental production restrictions linked to a military parade ended, analysts from ANZ said.
Domestic demand for construction steel is expected to improve slightly in September. Better weather in some regions and improved financial conditions in certain non-property sectors are likely to support this recovery, according to consultancy Mysteel. Other steelmaking inputs on the DCE also rose, with coking coal up 4.4% and coke increasing 4.62%. Brokers at Hexun Futures noted that ahead of the Chinese National Day holiday, coke and steel producers are slightly boosting their restocking of coking coal.
Steel benchmarks on the Shanghai Futures Exchange showed broad gains. Rebar increased 0.93%, hot-rolled coil rose 0.87%, wire rod climbed 0.37%, and stainless steel strengthened 1.2%. These gains reflect ongoing industrial activity and selective optimism in steel production, even as challenges in the property sector continue to weigh on raw material prices.
Source- Reuters
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