Iron ore prices

Locomotive hauling iron ore cargo in railway trucks through Saldanha Port before shipping out to China.

Iron ore prices rebounded from their lowest point in 10 months, driven by growing optimism surrounding China’s economic recovery despite initial weakness in the steel market.

In Singapore futures trading, prices surged by 2% to surpass $102 per ton after experiencing a nearly 4% drop earlier, dipping below the $100 mark. The latest government data, released on Sunday, revealed that manufacturing PMI for March saw a significant improvement, marking the highest level in a year. Both official figures and private surveys from Caixin exceeded market expectations.

However, challenges persist in the property sector, a key driver of steel demand, which has been grappling with a prolonged crisis with no clear resolution in sight. This ongoing struggle has been reflected in iron ore prices, which have seen a decline of over 25% since the beginning of the year.

Amidst a backdrop of disappointing demand, there’s been a notable surplus of iron ore supply. Australia, a major exporter, witnessed a surge in iron ore shipments in the week ending March 15 — the latest data available. Stockpiles at Chinese ports have swollen to their highest levels in over a year, reaching approximately 142 million tons.

The decline in iron ore prices this year carries significant implications beyond China, as it deals a blow to the primary revenue source for global mining giants such as BHP Group Ltd., Rio Tinto Group, and Vale SA. Australia relies heavily on iron ore sales, which contribute to around a third of its total resource and energy export revenues.

As of 5:53 p.m., iron ore in Singapore was trading at $102 per ton, marking a 1.9% increase. Dalian iron ore futures closed 3.8% higher following a notable rebound in the afternoon session. Similarly, futures for steel rebar — essential metal rods used in construction — turned towards gains after earlier dipping to their lowest levels in nearly four years.

The China Iron & Steel Association recently issued a warning, highlighting that the downturn in the property sector and relatively sluggish infrastructure projects are impeding the recovery of steel demand. The steel industry’s purchasing managers index for March plummeted to 44.2, marking its lowest reading since May of the previous year.

By Tom Brokaw

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