Iron ore hits five-month low on weak China factory activity data, demand worries

Dalian and Singapore iron ore futures hit five-month lows on Thursday, following a more than 10% drop in the past month, with the weaker-than-expected China factory activity data and gloomy near-term downstream demand outlook weighing on sentiment.

The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) fell to 49.5 in April from 50.0 the previous month, missing expectations of 50.3 in a Reuters poll and marking the first contraction since January.

This came after the official manufacturing PMI unexpectedly declined to 49.2 from 51.9 in March, according to data from the National Bureau of Statistics on Sunday.

The steel PMI fell for a second straight month to 45 in April, indicating a slowdown in the sector, CFLP Steel Logistics Professional Committee said on Sunday.

The most-traded September iron ore on the Dalian Commodity Exchange (DCE) ended daytime trading 2.31% lower at 698.5 yuan a tonne, the lowest since December 9 2022, and following a month-on-month drop of 13% in April.

The benchmark June iron ore SZZFM3 on the Singapore Exchange hit a five-month low at $99.2 a tonne but managed to rebounded to $100 a tonne as of 0711 GMT. This came after it had fallen by near 18% in the past month.

The other steelmaking ingredients coking coal DJMcv1 slipped 4.26% and coke DCJcv1 fell 2.47%.

“Hopes that China’s reopening and the building season from April to June would boost steel consumption have faded,” analysts at National Australia Bank said in a note.

Rebar on the Shanghai Futures Exchange SRBcv1 dipped 1.85% to 3,615 yuan a tonne, hot-rolled coil SHHCcv1 lost 2.01%, and wire rod SWRcv1 slid 1.06%.

“Downstream demand (for steel products) has proved to be weak by the end of April, and steel inventories are likely to pile up again in the rainy season (in Southern China) which will cap (steel) demand,” analysts at Sinosteel said in a note.

“Though steel output fell after some mills implemented equipment maintenance, supply remained sufficient and the reduction in output is still not enough to make a big difference in the current prices,” they added.

Stainless steel SHSScv1 gained 1.74%.