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China sees swings on iron and steel

May 9, 2024

Key Points:

  • Iron ore and steel prices in China have seen declines due to easing stockpiling post-Labour Day, with mixed trends in global markets.
  • The property sector’s challenges continue to impact steel demand, although regulatory changes offer a potential boost.

On Thursday, iron ore and steel product prices in China experienced a decline, primarily influenced by reduced demand following the Labour Day holiday.

Iron sees decline in May

The most-traded September iron ore on China’s Dalian Commodity Exchange was down by 0.6%, trading at 874.50 yuan ($121.06) per metric tonne. In contrast, the benchmark June iron ore on the Singapore Exchange saw an increase of 1.7%, priced at $116.70 a tonne, reflecting divergent trends in different markets.

Prices for other key steel-making components also fell on the Dalian Commodity Exchange, with coking coal down 2.1% and coke down 1.5%. These declines come amidst resistance from steel mills against higher price offers from coking coal producers, indicating tensions within the supply chain that could influence future pricing dynamics.

On the Shanghai Futures Exchange, steel benchmarks mostly showed a downward trend, although they remained above key technical support levels.

This situation highlights the market’s sensitivity to fluctuations in physical demand, which is currently under pressure from broader economic factors.

Impact from property sector impact

The property sector, a crucial consumer of steel in China, continues to face challenges, as illustrated by Country Garden’s announcement of its inability to meet its onshore coupon payments. This situation underscores ongoing issues within the property market that could dampen steel demand.

However, recent pledges by the government to reduce housing inventory and regulatory changes, such as lifting home purchase restrictions in Hangzhou, provide a glimmer of hope for improving demand in this sector.

Iron ore imports and prospects

Interestingly, China’s iron ore imports in April saw a slight increase from the previous month. This rise was encouraged by lower prices in March, prompting some buyers to anticipate a recovery in demand and prices later in the year.

As the dynamics of the iron ore and steel markets in China fluctuate due to various economic pressures and opportunities, it becomes vital for traders to stay informed and agile.

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