Iron ore is falling on risk aversion and news of steel production cuts in China

The most traded iron ore for the month of May on the China Dalian Commodity Exchange ended intraday trading down 2.8%.

Reuters

Mar 16, 2023 09:32 am

Mining Vale in Caragas (Pictures Ltd./Corbis/Getty Images)

(Reuters) – Iron ore futures fell in Dalian and Singapore stock exchanges on Thursday, as did steel indexes in China, as sentiment soured by rising risk aversion over banking crisis concerns.

The reported plan by China, the world’s largest steel producer, to cut its annual crude steel output again this year also weighed on iron ore and other steelmaking components, along with tepid data from the local real estate sector.

Iron ore, the most heavily traded month for May on China’s Dalian Commodity Exchange, ended intraday trading down 2.8% at 902 yuan ($130.75) a ton, after earlier hitting an all-time low of 897.50 yuan since March 9.

On the Singapore Exchange, benchmark iron ore in April fell 2.9% to $128.35 a ton.

“International macro volatility has intensified,” analysts at Sinosteel Futures said in a note.

Asian stocks posted losses and investors turned to the safety of gold, bonds and the dollar as Credit Suisse became the latest flashpoint for fears of a banking crisis.

Moreover, Sinosteel analysts add that “political risks are constantly increasing,” which increases the volatility of iron ore prices.

China will again reduce its annual crude steel production in 2023, Bloomberg News reported Wednesday, the third year in a row that the government has capped production under its emissions-cutting programme.

There has been no official announcement of the plan.

In the absence of any official guidance on production constraints, and with the overall positive outlook for China’s economic recovery this year, Sinosteel said there is a “high probability” that steelmakers will maintain a “steady increase in production” through the first half of 2023.