Iron ore futures declined nearly 1% to CNY 696 on Tuesday, nearing eight-month lows, as a flurry of negative signals from China raised fresh doubts over the metal's demand outlook.
Iron ore falls on weak China PMI
The downward pressure was driven primarily by weak economic data, with a closely watched private survey revealing that China’s manufacturing activity unexpectedly contracted in May, falling to its lowest level in more than two years. The data added to mounting fears about a slowdown in industrial production, a sector that heavily influences iron ore demand due to its link with steel manufacturing.
These concerns were further compounded by persistent pressure from U.S. tariffs, which continue to weigh on China’s export-driven industries and dampen investor sentiment. The global trade environment remains fragile, and China's manufacturing contraction points to waning domestic and foreign demand, undermining the outlook for raw materials like iron ore.
Adding to the bearish tone, reports emerged that Chinese regulators are considering a ban on property developers from pre-selling homes—a practice that has historically served as a crucial source of funding for the debt-laden real estate sector. If enacted, the measure could deepen liquidity issues for developers already struggling with high debt levels, raising the risk of widespread defaults. Such a move would be a significant blow to the construction industry, which accounts for a substantial share of China’s steel consumption and, by extension, global iron ore demand.
Trade tensions further unsettled markets
Meanwhile, renewed tensions between Washington and Beijing further unsettled markets. In a sharp diplomatic exchange, Beijing firmly rejected President Donald Trump’s accusation that China had breached a temporary trade accord and vowed to implement retaliatory measures. The escalating rhetoric has reignited fears of a broader trade conflict, which could erode business confidence and global demand for industrial commodities.
With a confluence of weak macroeconomic indicators, policy uncertainty in the property sector, and heightened geopolitical risk, the near-term outlook for iron ore remains under pressure. Analysts warn that unless there is a clear policy response from Beijing to stimulate construction and manufacturing activity, iron ore prices may remain subdued or fall further in the coming weeks.
