Iron ore falls on weak China data

Iron ore futures slipped to around CNY 775.5 per tonne on Thursday, marking their lowest level in a week, after data revealed a historic contraction in Chinese credit activity.

New yuan loans in China fell in July for the first time in two decades, underscoring a sharp pullback in borrowing by both businesses and households. The decline points to weakening private-sector demand as uncertainty persists over the economic outlook, with caution dominating ahead of ongoing U.S.–China trade negotiations.

The soft lending figures compounded existing bearish sentiment in the iron ore market, where prices were already under pressure from elevated steel inventories and lackluster downstream demand.

The sector has also been hit by recent adverse weather conditions — from intense summer heat to heavy rainfall — which disrupted outdoor construction activity and curtailed metals consumption across several provinces.

Iron ore prices also tracked steel prices lower, reflecting broader weakness in the ferrous complex. However, there is a potential offset from supply-side developments.

Reports indicate that steel mills in northern China have been ordered to curb production this month in the run-up to the September 3 military parade, part of measures aimed at improving air quality during the event. Such curtailments could temporarily tighten steel supply, help reduce excess inventories, and improve mill margins, which in turn could support iron ore demand in the short term.

Still, market participants remain cautious. The combination of weakening credit growth, fragile property sector demand, and seasonal construction slowdowns suggests that any rebound in iron ore prices may depend heavily on the scale and duration of these mandated steel output cuts, as well as signs of renewed policy support from Beijing to stimulate infrastructure investment.