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Iron Ore Futures Take a Hit as Chinese Demand Wavers

  • Iron ore futures fell nearly 7% in a single session, marking a 25% decrease year-to-date amid pessimism from China's National People's Congress event.
  • The price drop is attributed to weak demand from China's real estate and manufacturing sectors, with construction activity not picking up as expected after the Lunar New Year.
  • Analysts predict iron ore prices could fall to around $100 a ton as Chinese port stockpiles grow, suggesting a possible further decline before demand rebounds.
Iron Ore

To start the week, Ehsan Khoman, the Head of Commodities at MUFG Bank, points out that iron ore ended the session in Asia as one of the weakest major commodities. This downturn was primarily due to the lack of enthusiasm from China's National People's Congress event on Monday amid mounting concerns about worsening macroeconomic headwinds. 

Futures in the critical steelmaking ingredient are down 25% year-to-date in Singapore, and they fell nearly 7% on Monday to around the $107 a ton level. 

The 7% drop in Singapore was the largest daily decline since the near 10% plunge on April 22, 2022. 

Iron ore has slid about 25% from a peak of $142 a ton in early January as China's real estate and manufacturing secotr remain under pressure. Monday's annual National People's Congress in Beijing provided investors with no clear insight into demand-boosting policies. 

Related: Europe’s Secret Weapon In Its Energy War With Russia

Construction activity remains lackluster as China's yearslong crackdown on property debt squeezes a vital source of steel demand, while Beijing has refrained from deploying the type of massive infrastructure stimulus that it has used to revive the economy in the past. There had been hopes for a stronger pick-up in construction after the Lunar New Year holiday that ended in mid-February, but that hasn't eventuated. -Bloomberg

Iron ore prices are expected to tumble to around $100 a ton as stockpiles of the metal in Chinese ports are quickly building. 

"Prices will have to drop further for inventories to be withdrawn," Jinrui Futures Co. wrote in a note to clients. The broker suggested that clients initiate a short iron ore position before the Chinese steel demand returns. 

Related: 2 Companies That Could Help Europe Win Its Energy War With Russia

Weak iron ore prices in Australia led to big losses in the mining-heavy materials sector. Australian shares tracked iron ore prices lower. 

Could sliding iron ore prices be a bellwether of global economic growth?

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Is a global slowdown ahead? 

By Zerohedge.com 

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  • George Doolittle on March 12 2024 said:
    Incredible to see the major global automakers particularly in the USA price gouge crazy high and still go bankrupt anyways so yes, very bearish for iron ore futures absolutely.

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