Iron ore, steel to remain under pressure until year-end

Iron ore prices, which had zoomed to a high of $239 a tonne in May last year are currently hovering just above $100. Steel rebar prices, which had surged to $875 a tonne in October last year, are currently ruling at $575 a tonne. Hot rolled coils, which had topped $,1,900 a tonne in September last year, are quoted at $918 now.  

“Iron ore has been unable to escape the broader sell-off in commodities. Macro concerns have been key to driving prices lower,” said Warren Patterson, Head, Commodities Strategy at ING Think, the economic and financial analysis wing of Dutch multinational financial services firm ING. 

“A negative sentiment surrounding the Mainland Chinese economy and weak physical demand hammered prices. Indeed, second quarter GDP data this year showed that the Mainland Chinese economy expanded by 0.4 per cent year-on-year, reflecting a sharp slowdown from 4.8 per cent year-on-year in Q1,” said Fitch Solutions Country Risk and Industry Research (FSCRIR), a research unit of US-based Fitch. 

With China being the world’s largest consumer of steel as well as iron ore, Fitch Solutions said it expects further weakness in the prices of steel and iron ore in the coming weeks, especially as the country has extended lockdowns in numerous cities as Covid-19 cases continue to rise.