Iron Ore Falls on Demand Concerns

Iron ore futures fell toward CNY 700 per ton, hovering near 14-month lows amid persistent concerns over demand in top consumer China. Recent data showed China’s new yuan loans posted a record contraction in July as seasonal factors and weak household credit demand weighed on lending activity. This points to subdued property and infrastructure investment, key drivers of steel consumption in China, and in turn signals weaker demand for iron ore. Meanwhile, industry data showed blast furnace operating rates among Chinese steel mills rose to 82.64% last week, up 0.32 percentage points from the previous week. Elsewhere, reports indicated that China’s state iron ore buyer reached an agreement with Anglo American in April on an annual supply contract for the key steelmaking ingredient.

Iron ore futures climbed above CNY 710 per ton, recovering modestly from multi-month lows as signs of tightening supply and improving steel demand in top consumer China provided support. Industry data showed iron ore inventories at major Chinese ports edged down to around 156.8 million tons, pointing to potentially tighter supply conditions in the coming weeks. Daily hot metal production at Chinese steel mills also increased to 2.38 million tons, up 0.17 million tons from the previous week, while mill profitability improved to 33.77%, rising 1.74 percentage points from the previous month. Meanwhile, the People’s Bank of China is set to conduct a 1 trillion yuan reverse repurchase operation, which could provide additional support to economic activity by improving liquidity and credit availability.

Iron ore futures declined toward CNY 700 per ton, approaching 14-month lows as weak profitability among Chinese steelmakers continues to constrain the potential for a meaningful recovery in ore demand. Recent data also showed China imported 108.086 million tons of iron ore and concentrates in July, down 4.09% from June but still 3.5% higher than a year earlier. Meanwhile, slower consumer and producer inflation in China last month pointed to persistent weakness in domestic demand. On the supply side, however, tightening shipments continued to offer some support to prices. Industry data showed global iron ore shipments fell by 1.38 million tons in the week through August 9 to around 32 million tons, while volumes arriving at Chinese ports dropped by 13.1 million tons to 18.9 million tons.