Iron ore futures in China dropped more than 2 percent after climbing for two sessions, as the country’s steadily rising inventory of steel products raised doubts over a recovery in demand for the steelmaking raw material.
Investors also fretted over the magnitude of economic fallout from a global coronavirus outbreak, further weighing on iron ore and other ferrous derivatives in China, the world’s top steel producer and exporter.
The Dalian Commodity Exchange’s most-traded iron ore contract, expiring in May, fell as much as 2.3 percent to 639 yuan ($91.98) a ton. Steel prices on the Shanghai Futures Exchange wobbled.
“Weak fundamentals put pressure on futures prices,” analysts at SinoSteel Futures Co Ltd in Beijing wrote in a note, adding that while steel product inventories remain high, downstream demand may stay weak for some time.
“New orders tumbled to 19.8 from 39.6 in January, which is worrying because it implies steel demand in March may have yet to pick up as fast as expected,” Helen Lau, a metals and mining analyst at Argonaut Securities in Hong Kong said, citing data from Monday that showed China’s factory activity plunged in February.
Iron ore and steel futures gained over the past two days on expectations that China’s government would aggressively roll out further policy support for the coronavirus-hit domestic economy.
However, the lack of clarity on the timing and effectiveness of any further stimulus measures from Beijing tempered optimism. — Reuters
