Dalian Commodity Exchange (DCE) is closed for public holidays in China, before reopening in Sep 22.
The long break could not hide the growing bearish market sentiment as iron ore prices slid toward the $100/mt mark, after a series of price corrections for last 4-5 weeks.
More corrections might follow after the holidays as China’s property market faced a slowdown and possible defaults from the country’s second largest developer Evergrande with debts mounting around $300 billion.
A new norm around $100/mt
Market sources expected Beijing policymakers to continue crackdown on pollution ahead of the Winter Olympics, which will result in softer iron ore prices till the end of 2021.
Iron ore supplies also improved recently, as suppliers like Australia and Brazil typically faced less weather disruptions at the latter part of the year to make up for their earlier shortfall.
Thus, it was estimated around 111 million mt of iron ore arrivals to China by the end of September, based on Refinitiv vessel-tracking data.
This was much higher than iron ore import of 97.49 million mt recorded in August, indicating recovery of iron ore shipments that deflated support of higher iron ore prices.
Domino effects from Evergrande’s fall of grace
The embattled property developer might trigger a significant slowdown in property construction in China over the next few years.
As property construction accounted nearly a fifth or a quarter of China’s economy by fair estimates and a long-term decline posed risks to GDP growth and reduced commodities demand like steels for constructions.
The contagion effects may affect banks that offered loans to the developer, and it might not be contained in China, but had disinflationary effects worldwide as well.