Iron Ore Futures Decline Amid Output Cut Speculation

Singapore: Iron ore futures experienced a decline on Monday, influenced by renewed speculation regarding China’s potential reduction in crude steel output and conflicting statements from American and Chinese officials concerning trade discussions.

The most actively traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) decreased by 0.7%, reaching 709 yuan ($97.20) per metric ton, as of 0258 GMT. Simultaneously, the benchmark May iron ore on the Singapore Exchange saw a decrease of 0.07%, settling at $98.35 per ton.

Market discussions have resurfaced, indicating that China is considering a reduction of 50 million tons in crude steel output for the current year. This prospect has exerted downward pressure on the prices of steelmaking materials while simultaneously driving steel prices higher.

Baoshan Iron & Steel , a prominent listed steelmaker in China, suggested that the possibility of a crude steel output cut this year is significant, although it is unlikely to occur in April and May.

Requests for comments from the state planner and the state-backed China Iron and Steel Association have not yet received an immediate response.

Wu Wenzhang, chairman of Steelhome, a consultancy firm, stated that China’s steel supply and demand would regain equilibrium if this year’s crude steel output is 50 million tons lower than the previous year. This information was reported by the state-backed China Metallurgy News.

Wu further noted that steel consumption is projected to decrease by approximately 30 million tons in 2024 compared to the prior year, while steel exports are expected to decline by 15 million to 25 million tons.

Impact of Trade Tension Signals

Discordant signals emanating from the U.S. and China regarding negotiations aimed at de-escalating trade tensions have unsettled market participants.

Treasury Secretary Scott Bessent did not corroborate President Trump’s claim that negotiations with China were underway. Earlier, Beijing had refuted the existence of any ongoing discussions.

Performance of Other Steelmaking Ingredients

Other steelmaking ingredients on the DCE experienced weakness, with coking coal and coke declining by 1.25% and 1.27%, respectively. Steel benchmarks on the Shanghai Futures Exchange exhibited sideways trading.

  • Rebar increased by 0.42%
  • Hot-rolled coil saw a gain of 0.81%
  • Wire rod edged down by 0.54%
  • Stainless steel experienced a decrease of approximately 0.1%