Iron ore, widely seen as a real-time barometer of China’s economic pulse, is flashing fresh warning signs. Prices slid for a fourth straight session in Singapore, dropping below $93 a ton and hitting their lowest level in nine months.
China, the world’s largest consumer of iron ore, imports more than 70% of globally traded volumes. That gives iron ore prices an outsized role as a proxy for Chinese economic momentum, and the latest trade data suggests the world’s second-largest economy is still struggling to gain momentum, remaining mired in deflation.
At the start of the week, figures from China showed that nationwide steel output in May declined on a daily basis compared to April. Output was down about 7% from a year ago, marking the weakest May since 2018.
“Steel demand in China is likely to remain weak over the coming months over the upcoming seasonal lull,” Citigroup analysts wrote in a note, slashing iron ore forecasts.
They noted that China’s property market weakness has yet to show a meaningful turnaround while manufacturing continues to face headwinds. As a result, their three-month price forecast was lowered to $90 a ton from $100, and the six-to-twelve-month target was revised down to $85 from $90.
In a separate note, Goldman analyst James McGeoch provided a gloomy outlook for iron ore by ratcheting down price targets…
Not taking a lot of lead, notable that China has been a very very quiet tape, waiting, watching….. clearly Iron ore at $93.00 stands out, when I talk to trading they suggest the most convincing trade is further curve flattening out on back of mounted physical selling pressure in front months and continuous consumer hedging in the back end of the curve, Both miners and phys traders are selling tonnes aggressively, yes there is a flat price call that you can play the $90-95 range, however it’s a downward sloping trend. Recall start o year we kind of liked this $100-110 range (china infra seen as supportive and property policy creating a trough), that became $95-105, which became $90-100 (as infra in particular didn’t see the post winter pickup we expected) and its now $90-95 range.
McGeoch pointed to sliding steel prices in China.
China’s steel exports remain elevated.
The key takeaway is that China’s subdued iron ore market reflects the broader economic downturn, with persistent weakness in the property sector and no meaningful signs of recovery.
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