Chinese iron ore posts biggest daily decline in nearly two years

Iron ore futures fell by the most in nearly two years on Wednesday, weighed by prospects of stronger global supply and weakening Chinese steel demand.

According to Reuters, the most-traded January iron ore contract (SCO:COM) on China’s Dalian Commodity Exchange ended daytime trading -4.1% to 675.0 yuan/metric ton ($95.13), its biggest daily decline since October 2022; Chinese markets were closed on Monday and Tuesday for a holiday.

Benchmark October iron ore on the Singapore Exchange reportedly recently traded -1.8% at $90.50/ton.

The volume of iron ore shipped to global destinations from ports and mining companies in Australia and Brazil during the September 9-15 period jumped 12.3% from the previous week to 29M tons, the most in more than two months, according to Chinese consultancy Mysteel.

Also, Chinese government data showed August crude steel production fell for the third straight month, as steelmakers faced losses from weaker steel prices.

Property prices continue to fall as land sales stay at seasonal multi-year lows, leaving little room for steel demand recovery, ANZ analysts said, as reported by Reuters.

Goldman Sachs recently cut its iron ore price forecast for Q4 by $15 to $85/metric ton, saying a continuing build in total iron ore stocks is setting the scene for another price drop in October.

Goldman maintains the likelihood of falling exports poses a key risk to steel production in China in the coming year, which could lead to a further decline in Chinese iron ore demand “given that we see increased support from domestic demand as unlikely.”

Potentially relevant stocks include BHP (NYSE:BHP), Rio Tinto (RIO), Vale (VALE), Fortescue (OTCQX:FSUMF), Glencore (OTCPK:GLCNF) (OTCPK:GLNCY) and Anglo American (OTCQX:AAUKF) (OTCQX:NGLOY).