Iron Ore Retreats as Investors Eye Weaker Economy, Steel Outlook
(Bloomberg) -- Iron ore futures retreated as the market weighed a coming seasonal pick-up in Chinese demand against the prospect of a broadly weakening economy and more curbs on steel output.
The raw material had been regaining some ground after a collapse in July, with China’s upcoming fall construction season suggesting higher demand. But iron ore still faces headwinds as the world’s largest steel market faces several challenges for the rest of this year. Authorities want to rein in output, and production curbs to reduce emissions are expected to intensify in the last quarter.
Even if seasonal demand is expected to emerge soon, “it’s hard to change the weak outlook for the medium- and long-term given the overall guidance to lower crude steel production,” Zhongzhou Futures Co. wrote in a website note.
China’s economic activity weakened more than expected in August as an outbreak of the delta virus variant curbed consumer spending and travel. While that could trigger fresh government support including infrastructure spending, there’s typically a months-long lag between policy changes and their effect on steel demand.
Earlier this week, Baoshan Iron & Steel Co., the listed unit of China’s biggest producer, flagged the potential for renewed price declines in iron ore.
Futures on the Singapore Exchange fell 2.5% to $152.90 a ton as of 3:40 p.m. local time, after swinging between gains and losses. In China, iron ore closed 3.2% lower, while steel futures also retreated.
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