Dalian iron ore futures dropped 4% in early trade on Monday, extending losses into a third straight session on rising supply while demand remained weak amid a slowdown in construction activity in China.
The most-traded iron ore contract on the Dalian Commodity Exchange, with January 2020 expiry, fell to as low as 704.5 yuan ($101.53) a tonne, its weakest since July 8, from Friday’s 733.50 yuan. It was down 2.8% at 713 yuan as of 0230 GMT.
That added to the 5.4% drop suffered by the iron ore benchmark in the past two sessions amid seasonally weak demand for steel, particularly in the construction sector in China, the world’s top producer of the building and manufacturing material.
“We remain marginally bullish in our overall assessment of supply,” said Hui Heng Tan, analyst at commodities broker Marex Spectron. “Spot supply availability continues to improve as mills remain in de-stocking mode and domestic production picks up.”
Some steel mills have also reduced their iron ore purchases in part due to thin margins.
“Margins took a turn for the worse given weaker steel prices,” Tan said. “This means that the slowdown in steel rates will likely persist.”
Last week’s threat by U.S. President Donald Trump to impose an additional 10% tariff on $300 billion of Chinese imports from Sept. 1, also aggravated concerns over steel demand.
