Iron ore prices tumbled on Tuesday, as market participants turned cautious ahead of a week-long Lunar New Year holiday beginning on Feb. 11 in top steel producer China.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange ended daytime trading 5.6% lower at 933.50 yuan ($144.51) a tonne, after earlier hitting 925 yuan, its weakest since Dec. 10.
The steelmaking ingredient’s March contract on the Singapore Exchange slumped as much as 6% to $142 a tonne, though it recovered some lost ground to hit $143.40 by 0728 GMT, down 5.1%.
“As things stand, we estimate $150 iron ore as the approximate average breakeven for Chinese steel production, which is where prices are right now,” said Howie Lee, an economist at OCBC Bank in Singapore.
“With the various travel restrictions in Hebei and the impending Spring Festival, the market is naturally seeing some weakness in demand,” Lee added, referring to China’s top steelmaking province, where new clusters of COVID-19 cases have been detected.
Aside from investors’ weak pre-holiday risk appetite, prices of steel products and inputs have come under pressure due to thinning steel profit margins in China.
Spot iron ore in China traded at $158 a tonne on Monday, the weakest since Dec. 15, SteelHome consultancy data showed. SH-CCN-IRNOR62
As iron ore demand dipped, portside inventory in China rose for a third straight week to 126.20 million tonnes as of Jan. 29, SteelHome data showed.
Steel prices extended losses, with construction steel rebar on the Shanghai Futures Exchange SRBcv1 down 2.2%, while hot-rolled coil SHHCcv1 dropped 1.8%. Stainless steel lost 1.6%.
China’s weekly rebar output from 137 sampled steelmakers declined 3.2% at 3.34 million tonnes over Jan. 21-27, as thin margins and weak demand prompted mills to put their facilities under maintenance, Mysteel consultancy said.
Source:Reuters
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