Market Commentary
Iron ore extended losses to sub-$120 as China’s steel production slumped to the lowest in 17 months. According to the National Bureau of Statistics, China’s crude steel output slumped by 12% year-on-year to 83.24 million metric tonnes in August, the lowest since March 2020.The slump could be attributed to China’s efforts to cut steel output and curb pollution. Curbs are expected to extend through the rest of the year as authorities work towards ensuring blue skies for next year’s Winter Olympics held in Beijing. More broadly, market sentiment was further dampened by poor Chinese economic data, with retail sales growth slowing sharply due to the stringent measures to contain a coronavirus outbreak in China while China’s industrial output fell short of the median estimate. Demand growth for steel in China is decelerating as key indicators are showing weakness, analysts at Citigroup said in a report.
Iron ore futures were trading below $120 in London morning, with Oct trading down from 118.0 to 115.1 before drifting a touch lower to below $115. Nov also traded down to below 114.0. Spreads remained compressed, with Sep/Nov traded at 8.1, Oct/Nov at 1.3, Oct/Dec 2.45, Nov/Jan at 2.3, Nov/Q2 at 7.1.
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