Veriton Investment

Iron Ore Drops Below $100 as Market Fundamentals ‘Remain Weak’

(Bloomberg) -- Iron ore dipped below $100 a ton, as demand in China slowed before the Lunar New Year break and signs of a well-supplied market stack up.

Futures for 61%-content ore shed as much as 0.8% to $99.80 a ton in Singapore, to head for a fourth weekly drop, the longest losing run since June. The commodity has come under pressure as stockpiles at major Chinese ports and mills climb, and the steel market shows signs of seasonal softening.

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“Iron ore’s own supply-demand fundamentals remain weak,” said Steven Yu, a researcher at consultancy Mysteel. Hot-metal output at mills had been slower that expected before the week-long holiday starting mid-February, while restocking activity, which is generally supportive, has ended, he added.

Iron ore prices have been weakening as mills in China reduce steel output on an annual basis, while major miners in Australia and Brazil boost ore production. In addition to cargoes from established mines, a new project in Guinea, Simandou, will be ramping up this year, adding to seaborne supply.

Reflecting an abundantly supplied market, port stockpiles in China have ballooned to the highest level 2022, after expanding for the past five months. The rising holdings may also reflect the impact of a pricing dispute between miner BHP Group and state buyer China Mineral Resources Group Co.

Futures for March traded 0.8% lower at $99.80 a ton at 10:41 a.m. in Singapore. Iron ore was last below $100 in August, although that was for the then-prevailing 62% content material.