Iron Ore Futures Tumble For Third Week Amid Demand Fears

Iron Ore Futures Tumble For Third Week Amid Demand Fears

Iron-ore futures in Asia tumbled for the third consecutive week as demand fears (not helped by a resurgent Delta variant and more widespread lockdowns across the nation) and rising regulator controls in China become headwinds, according to Bloomberg

After a year-long vertical rampage, iron-ore futures in Singapore peaked in May and failed to make a new high in July. Since then, prices have tumbled in the last three weeks, down nearly 20%. 

Iron ore futures waterfall for the last three weeks. 

Major trendline broke. 

We noted Chinese regulators began to wage war against soaring commodity prices in late May into June.

With the emergence of the delta variant in China and authorities ordering new lockdowns, demand fears for iron ore continue to build this week: 

The steel-making material is down around 4.5% this week and has lost more than a fifth of its value since mid-July as Beijing ratcheted up efforts to clean up one of its dirtiest sectors. Broader concerns over growth in Asia’s largest economy are also brewing as authorities stick to an aggressive containment playbook to curb an outbreak of the delta virus variant.

In the latest development on steel curbs, Shanxi province in northern China has ordered mills to cut output in the second half, researcher Mysteel said in a note. Beijing has vowed to cap production below last year’s record high and raised export tariffs after mills churned out higher volumes in the first half. Executives from a slate of Chinese mills also pledged to strictly implement government orders to cut output amid the nation’s emission-reduction campaign, according to the China Iron & Steel Association. – Bloomberg

A plunge in iron ore prices also comes as Chinese credit impulse began to plunge earlier this year. Slower credit growth weighs on demand from construction and manufacturing sectors. The reflation trade usually lags the credit impulse by six or so months. Premium subs were recently made aware that the Chinese credit impulse has bottomed.

Now policymakers in China must expand credit or risk a further plunge in iron ore prices. 

Tyler Durden
Fri, 08/06/2021 – 14:25

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