On September 9, iron ore prices dipped below $90/tonne for the first time since 2022 as industrial commodities faced persistent pressure from weak Chinese demand and mounting concerns about global growth.
Specifically, iron ore fell as much as 2.3% to $89.60/tonne in Singapore on Sept. 9, recovering to $91.3/tonne by the session’s end. Aluminum was little changed after posting an eighth daily decline on Sept. 6. The LMEX index of six metals is now up just 3% this year, compared to 25% in mid-May.
In fact, iron ore futures have dropped by more than a third this year due to the unresolved steel crisis in China, threatening demand for the raw material.
However, there are bigger hurdles. Base metals and crude oil have also fallen in recent weeks as 2024 shapes up to be a volatile year across the entire commodity complex.
“Investors are shifting their focus from US inflation to growth worries. China lacks significant stimulus support, and the market is pessimistic,” said Jia Zheng, a trader at Shanghai Soochow Jiuying Investment Management Co.
Iron ore price movement over the past year (Source: Market Insider)
The more cautious sentiment toward metals was highlighted last week when Goldman Sachs Group Inc. slashed its long-held bullish copper forecast by about $5,000/tonne, mainly due to weak Chinese demand.
Citigroup said the uncertainty surrounding the US presidential election in November would dampen the global economy and weigh on metal prices.
Steel consumption in China has weakened due to the prolonged slump in the domestic property market, with the world’s top steelmaker, China Baowu Steel Group Corp., saying the industry may face a worse crisis than the downturns of 2008 and 2015.
Meanwhile, exports and growth in other sectors are mitigating the impact, and steel output cuts have resulted in an oversupply situation in the iron ore market.
According to Zhang Shaoda, an analyst at China Futures Co., iron ore futures on the Dalian Commodity Exchange in China are expected to touch 600 yuan ($84) per ton. This is 10% lower than the latest price.
Citi’s metals analysts said the contentious US election—and the risk of a trade tension reprise under a Donald Trump administration—has impacted China by prompting Beijing to delay a more forceful policy response.
China’s core inflation has just cooled to its weakest in over three years, the latest sign of soft demand in the world’s second-largest economy.
However, steel purchases typically rebound after the summer months, which could provide a psychological boost to mills.
“We expect iron ore prices to find support from mid-September as China’s autumn construction season accelerates and seasonal restocking ahead of the Golden Week holiday,” said Kaan Peker of RBC Capital Markets, referring to the week-long holiday in China that starts in early October.
Reference: Mining
