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Investors are weighing the effects of China’s uneven economic recovery, increased supply, and newly implemented monetary easing measures on the outlook for weak demand in China. As a result, iron ore futures in Singapore and Dalian faced setbacks, with iron ore futures falling to their lowest point in over a year on Monday, September 23.
The most traded January iron ore contract on the Dalian Commodity Exchange (DCE) closed down 4.5% for the day at 658.5 yuan per ton, marking the lowest level since August 17, 2023.
As of 07:01 GMT, the benchmark October iron ore price on the Singapore Exchange dropped 2.31% to $81.55 per ton.
Goldman Sachs lowered its forecast for iron ore prices in the fourth quarter of 2024 by $15 to $85/ton last week, citing an oversupply in the iron ore market. In an investment note, the bank’s analysts stated that while an increase in iron ore inventory over the next two weeks might support market prices, the growing inventory could also lead to price declines. They suggested that low-cost producers would need to cut production for the iron ore market to achieve balance.
Analysts at Westpac noted in a report, “The broader risk-averse tone is supported by weak demand prospects in China, evidenced by sluggish new home construction and a lack of compensatory activity in the infrastructure sector.”
Based on the data, the output of raw iron ore in China from January to August increased by 4.1% year-on-year. According to the Chinese consulting company Mysteel, stainless steel exports reached a historical high in August, rising by 33.4% compared to the previous year. The surge in exports, which increased by 18.9% from July, is attributed to the sluggish domestic demand this year, prompting manufacturers to increasingly turn to the global market.
The People’s Bank of China is providing cash to the banking system for 14 days at lower interest rates, indicating an intention to further stimulate monetary policy.
Despite a range of policies aimed at boosting domestic consumption, China, the world’s second-largest economy, is still struggling to enhance economic growth. Following a significant interest rate cut by the Federal Reserve last week, speculation is growing that China will accelerate its easing policies.
