Iron ore futures edged lower towards $103 a tonne in Singapore on Tuesday following a turbulent start to the week, with traders grappling with mixed data from China.
Despite a 4% gain on Monday, prices remained uncertain as the market evaluated the outlook for Chinese demand, amid ongoing concerns in the property sector and broader economic stabilisation efforts.
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China's Caution Towards Realty
In China, policy signals suggest a cautious approach towards real estate bailouts, with a focus on allowing "seriously insolvent" companies to go bankrupt, impacting the stability of the sector, BNP Paribas said in a report.
A slowdown in construction activities further dampened steel demand despite rising inventory levels, highlighting ongoing challenges, it said.
India's Domestic Price Hurdles
In India, the steel market is facing its own set of hurdles as domestic prices, notably hot-rolled coil, hit Rs 52,700/tonne, falling by Rs 200/tonne week-over-week. This is the lowest level of weekly average prices since December 2020. This downward trajectory, coupled with declining domestic HRC spreads, reflects the sector's struggle against weakened demand and pricing pressures, BNP Paribas said.
With high levels of stockpiles at China's ports, the brokerage expects iron ore prices to fall further. Export prices for iron ore fines also dropped by $12/tonne, indicating a challenging environment for iron ore producers.
Implications For Indian Steel Producers
Average HRC spread hit its lowest level since April 2020 in March 2024, led by a 2% month-over-month decline in HRC prices, offset by a 4.5% month-over-month decline in coking coal prices. This comes with the prospect of further declines with softening global iron ore prices.
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