Iron ore gains capped by persistent demand concerns

Iron ore futures inched higher on Monday, supported by encouraging economic data, though the overall demand outlook remains weak.

China’s retail sales in May grew at their fastest pace since late 2023, boosted by government subsidies that stimulated consumer spending, according to data from the National Bureau of Statistics (NBS). However, analysts emphasized the need for additional stimulus from Beijing, citing persistent challenges in the property sector.

Home prices continued to fall across major cities in May. Prices of new homes in Tier 1 cities declined 1.7pct YoY, while Tier 2 and Tier 3 cities saw steeper drops of 3.5pct and 4.9pct, respectively. Although fixed-asset investment rose 3.7pct YoY through May, property investment contracted more sharply, falling 10.7pct in the first five months of the year, NBS data revealed.

The steel sector’s struggles are also weighing on iron ore demand. China’s crude steel output dropped nearly 7pct YoY in May to 86.55 mln tons. The China Iron and Steel Association (CISA) has forecast a 4pct decline in domestic steel production for 2025. Furthermore, the outlook for Chinese steel exports remains dim, as protectionist policies in several key importing countries continue to curb demand for Chinese steel products, further pressuring iron ore consumption.

On the Dalian Commodity Exchange, the most-traded September iron ore contract rose 0.21pct to 704.5 yuan (USD 98) per ton. Coke and coking coal futures also gained, rising 1.9pct and 2.84pct to 1,371 yuan (USD 191) and 795.5 yuan (USD 111) per ton, respectively.

Meanwhile, on the Shanghai Futures Exchange, rebar futures rose nearly 1pct to 2,990 yuan (USD 416), while HRC futures increased 1.07pct to 3,104 yuan (USD 432). Wire rod futures edged up 0.15pct to 3,299 yuan (USD 459), while stainless steel futures dipped slightly, down 0.08pct to 12,550 yuan (USD 1,747) per ton.

1 USD / 7.18 yuan