Iron ore slumped more than 7 per cent on Monday to touch its lowest since early 2019, extending a long rout as factory data in China added to demand pessimism.
The raw material for steel is heading for its worst month in more than a year as China’s economy shows few signs of a decisive recovery and its steelmakers face deepening losses. China’s official gauge of factory activity for October missed estimates and pointed to a contraction.The property crisis and COVID-zero measures in China have weighed heavily on construction, and steel demand hasn’t posted the kind of bounce normally expected for what should be a busier season.
Steelmakers in the world’s top producer are having a tough time, with margins being squeezed as prices for key products like rebar and hot-rolled coil tumble. That tends to put pressure on raw materials prices as mills try to stem losses, and a China steel PMI for October pointed to a considerable contraction of output.
Still, Citigroup analysts including Jack Shang said in a note that construction demand may have bottomed out, and that the steel sector is set to benefit with resumption of building activities. Iron ore futures have more than halved from this year’s peak. Futures fell as much as 7.1 per cent to $US75 a tonne, its lowest since January 2019. Futures in Dalian dropped 1.5 per cent while rebar in Shanghai sank to its lowest in more than two years.