Iron ore falls on low demand, rising port inventory
IRON ORE FUTURES PLUNGED AT THE CLOSE OF THE WEEK’S TRAD ING activities as rising portside inventory of the steelmaking ingredient in China, the world’s leading steel producer, pressured by a weak demand, fuelled expectations that prices could further plummet in 2022.
Iron ore for May delivery on China’s Dalian Commodity Exchange traded 1.5 per cent lower at 634.50 yuan ($99.68) a tonne. Iron ore’s most-active January contract on the Singapore Exchange also weakened 0.3 per cent to $108.85 a tonne.
On the contrary, the benchmark contract rose to its third consecutive weekly rise, supported by optimism about China’s stimulus measures to bolster its economic growth and policy support for Evergrande, its debtsaddled property developers.
Commenting on iron ore’s tumble, Justin Smirk, senior economist at Westpac, Australian banking and financial services, said the iron ore port inventories built through recent weeks is a bearish signal and they are expected to continue to lift over the next 2-3 months as pig iron production is not likely to pick up until after the Beijing Winter Olympics next year.
While falling steel inventories in China may signal an improvement in downstream demand, Smirk said current levels were still at a five-year high, asserting that it has a long way to go before it signals a tight market.
He also noted that iron ore prices could fall sharply to $75 a tonne by the end of 2022 as tight steel production controls to curb emissions in China are likely to remain in place.