Iron ore inventories pile up in China

Iron ore has tumbled by around a quarter from a peak in early January as China’s real estate and manufacturing activity remained under pressure. The annual National People’s Congress in Beijing offered few prospects of a demand boost, and iron ore stockpiles at ports have ballooned to the highest in a year.

The plunge in the steelmaking ingredient was the most since mid-2022 on an intraday basis, and it was headed for the lowest close since August 2023.

Construction activity remained lackluster as China’s years-long crackdown on property debt squeezed a vital source of steel demand, while Beijing has refrained from deploying the type of massive infrastructure stimulus that it has used in the past. There had been hopes for a stronger pick-up in construction after the Lunar New Year holiday that ended in mid-February, but that has not materialised.

The longer-term outlook also looked shaky, as supply was eventually set to be boosted by a massive new iron ore mine in Guinea, with Chinese steel mills potentially becoming less dependent on mined ores as the country starts to develop larger volumes of steel scrap, according to Tom Price, senior commodities analyst at Liberum.

“It’s hard to build a bullish case for iron ore over any time horizon at the moment,” Price said by phone by from London. “There’s probably a speculative element at work today, with investors looking at what it will take for China to hit its growth targets for the year, and deciding that it’s just not going to happen.”

Singapore iron ore futures fell as much as 7.3% to US$106.80 per ton and were trading at US$107.20 in London. Futures in Dalian closed 5.3% lower, while steel contracts in Shanghai were also down. Non-ferrous metals edged higher on the London Metal Exchange, with copper adding 0.4% and zinc climbing 0.7%.

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