Quick overview

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Iron ore prices fell below $100 per ton amid indications of high seaborne supplies at a time when Chinese demand is facing challenges. Futures fell as much as 2.1 percent to $99.10 per ton in Singapore. China, the world’s biggest importer of iron ore, saw a decline in steel production in May, according to data released this week.

Furthermore, investments in fixed-income assets fell to levels not seen since the pandemic, exposing economic risks. According to Hu Yanbing, a researcher at Citic Futures, “the problems of iron ore’s high supply and high inventory at current prices are becoming increasingly apparent.” Second, ferrous metals are very sensitive to domestic macroeconomics, and the most recent Chinese economic data indicate that investment and consumption have both fallen short of expectations.

After five consecutive weekly declines—the longest losing streak since February—the steel-making staple has fallen by roughly 6% this year. Along with the state of demand in China, traders are also keeping tabs on the steady increase in production at the new Simandou mine in Guinea, which is supporting supply.

This week’s decline in crude oil prices, fueled by indications that the Strait of Hormuz might soon reopen, may have also hurt iron ore. Hu claims that this has led to lower freight rates. According to Hu, “expectations regarding the reopening of the strait led to a sharp drop in crude oil prices, which significantly lowered ocean freight rates and weakened cost support” for iron ore.