Iron ore futures fall as market frets over demand outlook

Iron ore futures fell on Tuesday as persistent demand concerns weighed on sentiment.

Weak seasonal demand, due to heavy rains and hot weather, pushed up finished steel inventories at major warehouses, raising fears of deteriorating steel margins. With Chinese mills maintaining high production levels, oversupply risks are growing, which could eventually force output cuts and weaken iron ore demand.

The market also came under short-term pressure from production curbs in Tangshan, where authorities ordered mills to cut sintering output between August 25 and September 3 ahead of a military parade in Beijing.

Meanwhile, tightening restrictions on non-VAT steel exports are clouding the outlook for Chinese steel trade. Traders reported that Chinese Customs recently blocked around 200,000 tons of alleged non-VAT HRC shipments. From October, new VAT rules will require exporters to pay the same taxes as in the domestic market and verify registration before customs clearance.

Rising protectionist measures in major importing countries further threaten Chinese steel exports, which have so far helped offset weak domestic demand.

On the Dalian Commodity Exchange, the most-traded January iron ore contract slipped 0.7pct to 776.5 yuan (USD 108.4) per ton. Coking coal fell 3.17pct to 1,160.5 yuan (USD 162) per ton, while coke dropped 2.41pct to 1,681 yuan (USD 235) per ton.

On the Shanghai Futures Exchange, rebar declined 0.99pct to 3,113 yuan (USD 435), HRC shed 0.71pct to 3,367 yuan (USD 470), and wire rod lost 0.89pct to 3,357 yuan (USD 469). Stainless steel inched up 0.08pct to 12,840 yuan (USD 1,793) per ton.

1 USD / 7.15 yuan