Iron ore futures fell to below CNY 760 per tonne in March, the lowest in over two months, amid growing concerns over increasingly weak demand in the market.
Iron ore falls to two-month low
The slump in prices is largely driven by a bleak outlook for the Chinese economy, the world’s largest consumer of iron ore. Recent data revealed that housing investment in China plunged 9.8% year-on-year, signaling continued struggles in the country's property sector. Additionally, new home prices fell from the previous month, further intensifying fears that the property crisis is far from over. This persistent weakness in the housing market is raising concerns about a prolonged downturn, which could lead to more liquidations of major property developers, who have historically been significant consumers of steel and its raw materials, including iron ore.
What's hitting the market
The challenges in the property sector are compounding the woes in the broader industrial and construction markets, putting additional pressure on demand for steel and iron ore. With major property developers facing mounting financial difficulties, the outlook for iron ore consumption in China remains uncertain. Furthermore, protectionist policies imposed by key Chinese trading partners are expected to limit the ability of Chinese metal producers to export surplus material to foreign markets. Countries such as the United States, the European Union, and others have implemented or are considering tariffs on Chinese steel and metal exports, which further dampens global demand and exacerbates the supply glut in the domestic market.
Chinese moves on iron ore
In response to the mounting pressure, the Chinese government has signaled potential cuts to steel production capacity this year. Markets are currently expecting these measures to remove around 50 million tons of steel from the supply chain, a move aimed at addressing the oversupply in the steel sector and reducing the strain on domestic metal markets. While the government’s intervention is seen as a necessary step to curb overproduction, the impact of these cuts may take time to materialize, and the long-term effectiveness remains uncertain. The combination of weak domestic demand, export restrictions, and capacity adjustments has created a volatile environment for iron ore prices, with markets remaining cautious as they await further economic signals from China.
