Iron Ore Prices Stiff on Bearish Demand Anticipation

Iron ore prices, braces amid China’s depressed economic outlook, have plummeted since the end of the Chinese New Year, causing concerns about fluctuating demand and scratching mining stock in top producer Australia.

Iron ore futures declined by -0.21% to $125.84 per tonne in the Asian afternoon session. Meanwhile, iron ore futures May contracts traded in China’s Dalian Commodity Exchange (DCE) rose by 1.14% to $123.56 a tonne in the closed session.

Concurrently, a report indicates an approximately 8.00% decrease in the metal’s value since China, the primary consumer of this key steelmaking component, resumed production on February 19.

This has exerted downward pressure on Australian mining stocks, causing them to reach four-month lows on Tuesday.

Even with Beijing’s most substantial reduction in the benchmark mortgage rate to recover the struggling property market, prices did not receive the expected support that usually accompanies such stimulus measures.

Meanwhile, the decreasing prices are not necessarily easing the situation for steel producers, as many of them continue to utilize inventories purchased at higher costs despite the drop in steel prices.

After the Lunar New Year holiday last year, ore prices increased and concluded the year on a more vital note, contrary to market expectations, despite a decline in Chinese steel demand.

However, the recent directive from China advising heavily indebted local governments to postpone specific state-funded infrastructure projects has added a new layer of uncertainty to demand, in addition to the ongoing negative impact from the property sector.

Dalian’s Iron Ore Surge on Hopes of Boosting China’s Demand

Despite the tight iron ore market, China’s futures for the metal surged for two consecutive days on Beijing’s Dalian as optimism about demand recovery clashed with concerns over the troubled property market, limiting overall gains in a strengthening steel market.

According to reports, data indicates that the transaction volumes of construction steel products among Chinese traders witnessed a substantial increase of 98.30% compared to the previous day, reaching 106,700 tons on Tuesday.

Furthermore, analysts observe that the extent of steelmakers’ interest in replenishing ore stocks in the upcoming days hinges on the level of recovery in steel demand.

Meanwhile, the market is closely observing potential stimulus announcements from China’s upcoming National People’s Congress (NPC), the top decision-making meeting scheduled for the coming week.