The most-traded September iron ore contract on China’s Dalian Commodity Exchange ended daytime trade 5.8% lower at 719.50 yuan ($107.49) a tonne, extending losses to a third session and touching its lowest since June 23.
Mining stocks also slid, with Vale down 3.5% from the previous week, Rio Tinto down 3.69%, and Fortescue down 6.16%.
Chinese mills have idled dozens of blast furnaces as stocks piled up after domestic demand weakened, hit by covid-19 restrictions and bad weather.
The rising prospect of a global recession also weighed on sentiment and China’s deliberate move to curb steel output under its decarbonization plan.
“We expect iron ore futures will trade lower this week given these overwhelming price negative factors,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.
Cities in eastern China tightened covid-19 curbs on Sunday as coronavirus clusters emerge, posing a new threat to China’s economic recovery under the government’s strict zero-covid policy.
Resurgent iron ore shipments from Australia and Brazil, causing China’s portside inventory to rise last week after declining for eight straight weeks, and Chinese property developer Shimao Group missing a bond repayment, also fuelled the sell-off.
“Given that Chinese blast furnaces will likely continue exercising better production discipline, we anticipate that iron ore port stocks should extend inventory builds this week,” Widnell said.
Nearly 90% of Chinese steelmakers suffered losses from weak sales and low prices, according to Chinese industry data provider Mysteel.
(With files from Reuters)
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