Iron ore futures extended losses as investors focus on the outlook for supply, while deepening strains between China and the U.S. hang over global markets.
“Iron ore shipments have increased significantly recently, while port inventories remain at a low level despite the slight rise in volume,” Huatai Futures said in a note. Although supply has rebounded this quarter, the consumption rate for steel continues to be high, it said. Concerns about supply in Brazil as the country grappled with the coronavirus pandemic had helped boost iron ore prices in May.
Tensions in Sino-American relations continue to escalate, with the U.S. considering sanctions to punish Chinese officials and businesses for Beijing’s crackdown on Hong Kong. On the macro front, China’s economy is inching out of the coronavirus slump in May, according to the earliest available indicators, with better sentiment among companies tempered by the grim global outlook.
There are signs that virus infection rates are moderating with economies edging toward restarts and cases in the U.S. rose at the slowest pace since March. Brazil’s Health Ministry said the curve of Covid-19 infections is still growing. Brazil shipped 1 million tons of iron ore and its concentrated products in the first 15 business days of May, according to data from the country’s economy ministry.
China’s iron ore stockpiles fell 1.5% to 109.3m tons in the week ending May 22, according to Mysteel Global data compiled by Bloomberg. Japan Iron and Steel Federation’s chairman said Japanese steelmakers are concerned market conditions will deteriorate as China boosts steel output and exports as it recovers from coronavirus. (Bloomberg)