Iron ore prices headed to their lowest close since last September, amid a seasonal slowdown in demand and signs that Chinese mills are cutting steel production.
Futures fell for the fourth consecutive day in Singapore, falling below $93 per ton. Shanghai Metals Market explained in a note to clients that the rainy season in southern China, coupled with high temperatures in the north, contributed to a slowdown in construction activity.
Iron ore has been under pressure in recent weeks, as traders anticipate a slowdown in construction activity during the summer, in addition to efforts by Chinese authorities to limit steel production to address the market oversupply. The declines follow a four-week losing streak, the longest since last January.
Citigroup said in a note to clients, “Steel demand in China is likely to remain weak in the coming months due to the anticipated seasonal downturn,” noting that the weak Chinese property market shows no signs of recovery, and that the manufacturing sector is facing increasingly unfavorable trade conditions.
The bank lowered its iron ore price forecast for the current and next three months to $90 per ton, compared to a previous estimate of $100. It also lowered its forecast for the next six to 12 months to $85 per ton from $90.
On the supply side, producers in Brazil—the second-largest exporter after Australia—increased their shipments, with exports reaching 35.077 million tons in May, a record for the month.
