Dalian iron ore price hit a one-year low on Wednesday amid growing demand concerns amid China's restrictions on steel production and the worsening liquidity crisis in the country's real estate sector.
The top-traded January iron ore contract on the Dalian Commodity Exchange ended day trading at 536.50 yuan ($83.85), the weakest since November 9, 2020, down 4.6 percent, after touching 518.50 yuan at the start of the session.
On the Singapore Exchange, the most traded December contract fell 4% to $87.20 per ton as of 0721 GMT, after initially falling as much as 6.9%.
“(China's steel) production restrictions have stifled winter (iron ore) storage and replenishment expectations,” Zhongzhou Futures analysts wrote in a note.
“As the scope of limited production expands during the heating season, blast furnace maintenance has increased.”
Loose supply and weak demand indicate that port iron ore inventory in China rose to a 31-month high of 145.10 million tons last week and will continue to accumulate, SteelHome consulting data shows.
The deepening liquidity crisis in the Chinese real estate sector, which accounts for about a quarter of domestic steel demand, has added to the bearish mood ahead of the deadline for cash-strapped China Evergrande Group to pay offshore bond coupon payments on Wednesday.
"The rising risks of weak demand from the Chinese real estate sector have shown that iron ore futures are leading the decline," said Daniel Hynes, senior commodities strategist at ANZ.
long-term outlook
Market analyst Fitch Solutions revised its iron ore price forecast from $170/ton in 2021 and $130/ton in 2022 to $155/ton and $110/ton, respectively.
Over the long term, Fitch forecasts prices to fall to $65/tonne by 2025 and to $52/tonne by 2030.
"We maintain our view that iron ore prices will continue to trend downward as growth in steel production in China cools and higher output from global mills will continue to loosen the market."
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