Iron ore fell below US$100 a metric tonne for the first time in 14 months as China’s moves to clean up its heavy-polluting industrial sector spurred a swift collapse.
Futures prices sunk to as low as US$99.50 a tonne on the Singapore Exchange and wavered at about US$100 a tonne through the overnight trading session, which is daytime trading hours in the US.
Iron ore has plunged more than 55 percent since peaking in May as the world’s biggest steelmaker intensifies production curbs to meet a target for lower volumes this year, and a sharp downturn in China’s property sector hurts demand.
The slump in the steelmaking ingredient shows how top consumer China could sway the market at a time when there is booming demand in the broader commodities market as economies reopen from the worst of the COVID-19 pandemic.
“Dramatic declines in iron ore prices” are mainly built on the view that “this year’s effort will likely be strictly enforced,” ED&F Man Capital Markets analyst Ed Meir said.
Iron ore futures plunged more than 20 percent this week.
Past efforts by Beijing to rein in steel production due to environmental concerns had largely failed as local governments weighed regional economic growth against clean skies.
Iron ore’s slump makes it one of the worst-performing major commodities and a notable outlier in a broader boom that has seen aluminum soar to a 13-year high, gas prices jump and coal futures surge to unprecedented levels.
A drop back to double digits for the first time since July last year would be a relief for steel producers, but a blow to the world’s top miners, which have enjoyed bumper profits during the first-half rally.
It is bad news, too, for top iron-ore producer Australia, where the key steelmaking ingredient generates about 40 percent of goods exports.
It has been a stark turnaround from the first half, when steelmakers ramped up output and economic optimism and stimulus aided consumption.
The rally then faltered after China began cracking down on surging commodity prices, and the decline gathered pace as authorities rolled out more measures to reduce steel production and end-user sectors like property weakened.
Iron ore’s deepening sell-off has seen volatility jump to the highest in five years, with UBS Group AG saying the decline “has played out faster than expected.”
Inventories at ports are 10 percent higher than a year earlier and expectations for Chinese demand to soften further coincide with forecasts for global supplies to rise.
UBS predicted prices would average US$89 a tonne next year, a 12 percent cut to its previous forecast.
It is a different story for steel, where prices have stayed elevated. The market remains tight of supplies as China’s production cuts significantly outpace declining demand, Citigroup Inc said.
Metals:
‧Gold for December delivery on Friday fell US$5.30 to US$1,751.40 an ounce, down 2.2 percent weekly.
‧Silver for December delivery fell US$0.45 to US$22.34 an ounce, down 6.5 percent for the week, and copper for December delivery fell US$0.03 to US$4.25 a pound, down 4.5 percent weekly.
Additional reporting by staff writer
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