Iron ore: Chinese buyers cautious over fear of economic slowdown in US

Friday, Aug 05,

Chinese buyers in the spot iron market get cautious over the fear of another slowdown in the US economy.

Shanghai rebar steel futures on Friday fell more than 2 percent to reach their lowest in over three weeks. The most-active January rebar contract on the Shanghai Futures Exchange fell as low as 4,823 yuan ($749)/MT, its lowest since July 11. The contract is down 1.6 percent for the week so far, its biggest loss since mid-June.

The drop in rebar futures has raised concerns that it could put a pause to the recent run-up in prices of iron ore, the key steelmaking raw material.

“Market sentiment has been hit by worries over a slowing global economy and I am concerned that there will be a temporary end to the current upward trend in iron ore prices next week if steel prices continue to fall,” said a broker in Beijing

Steel mills and traders in China, the world’s top steel producer and iron ore consumer, have started to step back amid mounting global market jitters, which may exert downward pressure on steel prices as well as iron ore prices.

“Restocking as well as rising steel prices had encouraged Chinese steel mills to accept higher price offers for iron ore. But we might see the uptrend braking if steel prices fall because that means margins of steel mills would shrink.”, said another trader based in China.