Iron ore fell to the lowest since October — after dropping almost 9% last week — with hopes for a rebound in Chinese steel demand following the Lunar New Year holidays fading.
Futures for the steelmaking ingredient lost as much as 3.6% in Singapore on Monday, a worrying sign given that March and April, typically busy months for construction in China, are fast approaching. Vale SA, the world’s second-largest iron ore producer, said it’s seeking to increase its sales outside of China, an indication that miners aren’t optimistic about a revival.
Steel production is weak and has not fully recovered after the Lunar New Year break, Minmetals Futures Co. said in a note. Mills are likely to determine output based on sales volumes due to low profitability, it said.
Read More: Vale Bets on Iron Ore Sales Outside China as Supply Tightens
Iron ore was down 3.5% to $115.90 a ton as of 12:42 p.m. in Singapore, after touching the lowest intraday level since Oct. 27 earlier in the session. Chinese futures dropped 2% in Dalian, while steel contracts in Shanghai declined.
Inventories at major Chinese steel mills jumped 25.7% in mid-February compared with early in the month, according to data from China Iron and Steel Association. Daily crude steel output during the latest period saw a modest increase.
Iron ore prices rallied in the latter part of last year, on hopes Chinese stimulus measures would revive economic activity, but local governments have so far appeared reluctant or unable to borrow more. That’s fueling expectations Beijing may pick up the slack and take on more debt. In the property market, meanwhile, Moody’s Investors Service withdrew credit ratings from 10 Chinese developers on Friday.
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