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Iron ore prices moved lower as the market weighed an upcoming seasonal pick-up in Chinese demand against the prospect of a broadly weakening economy and further restrictions on steel production.
The price had regained ground after the July slump, with the upcoming autumn construction season in China suggesting greater demand.
Chinese economic activity weakened more than expected in August as an outbreak of the delta virus variant curbed consumer spending.
Iron ore also faces headwinds as China wants to rein in production, and production restrictions to reduce emissions are expected to intensify in the fourth quarter.
Although seasonal demand is expected to emerge soon it is difficult to change the weak outlook for the medium to long term, given the overall guidance to reduce crude steel production.
Earlier this week, Baoshan Iron & Steel Co, China’s largest producer, signalled the potential for a renewed decline in iron ore prices. “We expect Chinese steel reductions to be targeted in the fourth quarter, when demand slows seasonally and air pollution is in focus (especially ahead of the Winter Olympics in February 2022) and as a result we expect prices to stabilise in September/October before continuing to fall below $100/tonne in 2022.”
