Iron ore dropped below US$90 ($135) a tonne on Monday — its lowest point since November 2022 — as concerns over a slowdown in some of the world’s largest economies roiled commodity markets.
The price fell as much as 2.3% to US$89.60 a tonne in Singapore yesterday, and was sitting at US$90.70 as of 2:30pm local time.
Futures for iron ore have fallen by more than a third this year as China’s steel crisis threatens demand for raw materials and worries about a US recession intensify.
Consumption of steel in China has weakened due to the country’s ongoing real estate woes, with the world’s biggest steel producer, China Baowu Steel Group, saying the industry could be facing worse downturns than those in 2008 and 2015.
Exports and growth in other sectors have been softening the impact, but cuts to steel output have left the iron ore market labouring under excess supply.
Those concerns were heightened on Monday by data showing China’s consumer prices rose by an underwhelming 0.6% last month as policymakers struggle to stimulate consumer spending.
“Investors are shifting focus from US inflation to growth fears,” Jia Zheng, head of trading at Shanghai Soochow Jiuying Investment Management Co., told Bloomberg. “China lacks significant stimulus support and the market is pessimistic.”
But there are other headwinds also at play. Brent oil plunged 10% last week to its lowest close since 2021, while copper — once hailed as this year’s breakout commodity — has dropped 20% since its May record.
“The recovery in equities [last month] suggested that China’s woes may be isolated to China, and could even be good news for the rest of the world to the extent that commodity prices are falling, causing bond yields and interest rates to drop,” Barrenjoey’s chief macro strategist, Damien Boey, told the Financial Review.
“But markets are now starting to recognise that if things are bad in China, there will be contagion from that, which is what we’re seeing in commodity markets.”
Write to Oliver Gray at Mining.com.au
Images: iStock
