Iron Ore Weakens Despite China Stimulus

Iron ore futures hovered around CNY 710 per ton, with underlying demand concerns persisting despite fresh Chinese stimulus signals. China’s steel output fell 3.6% year-on-year to 76.93 million tons in July, the lowest for the month since 2017, while inventories remained elevated. Weak property activity weighed on demand, with home prices down 3.2% year-on-year, while only about one-third of steelmakers were profitable. China’s July iron ore imports also fell 4% month-on-month to 108.09 million tons as shrinking steel margins prompted some mills to undertake maintenance. Meanwhile, fresh stimulus measures and expectations of stronger demand ahead of the September peak season offered support, with the government planning measures to boost domestic demand and growth and the NDRC urging local governments to accelerate major projects.

Iron ore futures hovered near CNY 700 per ton, staying close to 14-month lows amid signs of persistently weak steel demand and abundant global supply. Chinese steelmakers continued to face deteriorating margins and a prolonged property sector downturn, weighing on demand for the key steelmaking ingredient. Industry data showed that China’s daily crude steel output fell 11% in July from the previous month to 2.48 million tons, while daily hot metal production declined 2.2% to 2.2 million tons. Meanwhile, Australian mining giant Fortescue reported higher annual profit, supported by increased iron ore shipments and stronger realized prices. The company posted a record annual shipment of 201.3 million metric tons of iron ore. Elsewhere, Singaporean authorities said they had received reports concerning Radiant World, one of the world’s largest iron ore traders, although no further details were provided.

Iron ore futures fell to around CNY 710 per ton in mid-August, 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.