Iron ore futures rebounded this week after physical prices posted their fastest daily decline for the week amid limited demand and weak outlook.
September iron ore swaps on the Singapore Exchange (SGX) fell nearly 13% last week, while iron ore futures on the Dalian Commodity Exchange (DCE) closed down 6.21 percent.SGX September contract was up 5.13 percent in Singapore time (7.42). GMT) rose to $137.30/dmt by 3.42 pm, and the January contract on DCE rose 0.26 percent to close at 777.50 yuan/t.
A Beijing factory analyst said, "We had predicted that iron ore prices would decrease by $120/dmt due to the falling demand. After the recent sharp decline, now $100/dmt seems possible. The decline in the paper market was beyond expectations." said.
A Singapore-based analyst said, "$130/dmt iron ore prices are at a reasonable level, and iron ore surplus is likely to continue with the cuts in steel production." said.
Market participants cited the steel production cuts in China as the main reason for the continued demand and consequently iron ore prices falling 40.3 percent from 1 July to $131.80/dmt as of this week.
"The physical fundamentals are very weak, there are too many offers in the market without buyers," a Beijing-based trader said. said.
Heavy cuts are expected in July-December due to the government's target of keeping steel production at or below last year's level of 1.06 billion tons. According to the National Bureau of Statistics, China's crude steel production fell for two consecutive months in July, while production increased by 8% year-on-year in the January-July period.
China has introduced one-year production cuts in its steelmaking hub, Tangshan, and tighter production cuts are expected in other major steelmaking provinces such as Jiangsu and Shandong.
The Chinese domestic steel market is also going through a seasonal season of weak demand, during which mills typically undertake maintenance. Some mills were reselling long-term contracted iron ore cargoes due to weak demand.
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