MNI: China Iron Ore, Steel To Stabilise On Demand Rebound

MNI (BEIJING) - Sliding Chinese iron ore prices should stabilise around USD80-90 a tonne within the year, as steel demand rebounds during the September-October peak season, local analysts told MNI.

High-cost, non-mainstream suppliers will typically decrease shipments should iron-ore prices continue to trade below USD90 a tonne, which will add further price support, said Bai Jing, an analyst at Hongyuan Futures.

A mid-August rebound faltered following soft PMI data, Bai said, with the Dalian Commodity Exchange’s most traded iron ore contract falling 11.24% this week to near CNY671 a tonneas of press time, hitting its lowest level since August 2023. Singapore Exchange futures contracts closed around USD91 a tonne on Thursday, down 27.6% since the start of the year.

China's current inventory of over 150 million tonnes will be hard to digest without an uptick in steel demand beyond expectations, meaning prices will remain pressured over the medium to long term, an analyst at GF Futures told MNI. (See MNI INTERVIEW: China Decarbonisation To Lower Aussie Ore Demand)

STEEL PRICES

Steel rebar prices will likely slide below CNY3,000 a tonne should iron ore prices continue to fall, Bai estimated, noting August’s ferrous metals-related rally had ended amid concerns over recessionary rate cuts in the U.S. and weak domestic industrial sentiment. But a price collapse was not expected given the arrival of peak season demand, the end of extreme summer weather, faster local government special-bond issuance and low rebar inventory levels, she continued. 

“These factors will drive a modest improvement in month-on-month demand growth in September,” Bai said, conceding property would continue to weigh as recent support policies only restore market sentiment marginally. (See MNI: China H2 Steel Outlook Subdued)

Building material demand will see a limited rebound over September and October given few newly started infrastructure projects and tight funding conditions, said Jiang Weibo, an analyst at Zhongzhou Futures, predicting rebar futures could reach CNY3250-3300 a tonne before falling back amid weak market expectations for strong stimulus.

EXTERNAL DEMAND

Although sentiment on Beijing’s steel exports had decreased following Canada’s recent decision to follow the U.S. in announcing 25% tariffs, the GF Futures analyst noted the direct impact would be limited given both countries imported 1.5 million tonnes from China last year, only 1.6% of total shipments. 

However, this could influence other countries to follow suit, such as Vietnam, which had previously launched anti-dumping investigations into China’s steel exports and became the country’s largest steel destination in 2023, Bai added.