Proudly sponsored by

Iron ore’s plunge deepens as BHP flags ‘stern test’ from China

Iron ore in Singapore has plunged by a third since spiking to an all-time high in May.
Image: Ian Waldie/Bloomberg

Iron ore extended its rout as BHP Group warned it sees an increasing likelihood of “stern cuts” to China’s steel output this year.

The prospect of much lower steel production in the second-half is “testing the bullish resolve of the futures markets”, BHP wrote in a commodities outlook report on its website. Iron ore in Singapore has plunged by a third since spiking to an all-time high in May.

China’s steel industry is under pressure after pledging to reduce output this year, a goal that requires huge second-half curbs to offset booming output earlier in 2021. Production in July was more than 8% lower year-on-year, data on Monday showed.

Futures in Singapore fell 2.4% to $154.45 a ton by 12:37 p.m. local time, and are heading for a fifth weekly loss. In China, futures dropped 1.2% to head for their lowest close since November.

While investor attention is very focused on China’s output curbs in the second half, the nation’s demand trends will also be critical. Beijing is pushing a range of measures to control the property sector, which accounts for big chunk of steel usage and has traditionally helped drive surges in iron ore prices.

“Policymakers are clearly concerned about over-investment and concentrated credit risk in the property sector,” Commonwealth Bank of Australia wrote in an emailed note. And even if China swings to more pro-growth policies to battle recent weakness, “there’s a good chance that the property sector is left out”.

Shanghai steel futures also dropped, with hot-rolled coil down 2.7% and rebar down 3.4% by the close of morning trading.

© 2021 Bloomberg

COMMENTS   1

You must be signed in to comment.

SIGN IN SIGN UP

Resources/mining shares saves the fiscal, they have record cash flows.

And they are getting sold off?

Plus with the instability in the world, covid-19 numbers shooting up, Gold price at $1780.

Plus the US approved the budget to upgrade airports, highways and railways.

I don’t understand it.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

SEARCH COMPANIES
Enter company name or share code:

ECONOMIC DATA  

  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products Sep 2021 4.90%
  CPI ex OERThe Consumer Price Index excluding Owners’ Equivalent Rent (CPI ex OER) measures monthly changes in prices for a range of consumer products excluding Owners’ equivalent rent that measures changes in the cost of owner-occupied housing Sep 2021 5.50%
  RepoThe rate at which the Reserve Bank lends money to the country’s commercial banks and set by the Reserve Bank’s Monetary Policy Committee. Oct 2021 3.50%
  Prime lendingThe Prime Lending Rate is the rate of interest that commercial banks will charge their clients when issuing a loan (home loan or vehicle finance) Oct 2021 7.00%
INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles:
Click a Company: