Iron ore declines on weak property data, pressure on steel margins

Iron ore futures fell on Tuesday as weak Chinese property sector data and concerns over deteriorating steel mill margins weighed on market sentiment.

China’s property market, once the country’s largest steel-consuming sector, remains under pressure despite government support measures. New home prices fell 0.2pct month-on-month in May, while property investment during January-May declined 16.2pct YoY. Commercial property sales by floor area also dropped 10.8pct during the first five months of the year, highlighting the continued weakness in construction-related demand.

Market insiders also pointed to worsening margins among Chinese steel mills as seasonal weakness in steel consumption coincides with relatively high production levels. Daily crude steel output among member mills of the China Iron and Steel Association (CISA) averaged 2.08 mln tons during June 1-10, up 3.8pct compared with the last 11 days of May.

Chinese steel traders said domestic steel prices remain under pressure due to the lack of strong demand drivers and ample supply. However, some market participants noted that easing concerns over the Middle East conflict could support Chinese steel exports to the region, one of the country’s key export destinations.

On the Dalian Commodity Exchange, the most-traded September iron ore contract fell 0.85pct to 762 yuan (USD 112.7) per ton. Coking coal and coke futures declined 1.1pct and 0.67pct to 1,343 yuan (USD 199) per ton and 2,083.5 yuan (USD 308) per ton, respectively.

On the Shanghai Futures Exchange, rebar futures decreased 0.5pct to 3,169 yuan (USD 469) per ton, while HRC futures fell 0.29pct to 3,382 yuan (USD 500) per ton. Wire rod futures remained unchanged at 3,376 yuan (USD 500) per ton, while stainless steel futures climbed 3.08pct to 15,240 yuan (USD 2,255) per ton.

1 USD / 6.75 yuan