Iron ore price drops as China central bank’s rate move defies expectation

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trade 3.17% lower at 933 yuan ($130.10) a metric ton, the lowest since Dec. 20, 2023.

The benchmark February iron ore on the Singapore Exchange was 1.38% lower at $127.9 a ton, as of 0702 GMT, hitting the lowest since Dec. 5.

China’s central bank left the medium-term policy rate unchanged on Monday, defying market expectations as signs of a weaker currency continued to limit the scope of monetary easing.

“The weakness in the ore market is partly because macroeconomic uncertainties mounted after the central bank did not cut rate,” said Pei Hao, a Shanghai-based analyst at international brokerage FIS.

Pei added it was also because “weak sentiment due to faltering demand and a quicker-than-expect pick-up in portside ore inventory filtered through into this week, sending further downward pressure to prices.”

The continuous weakness came despite Beijing pledging better financing coordination for the housing sector.

China’s housing ministry and financial regulator asked local governments to better coordinate with financial institutions to provide financing support to real estate projects, as policymakers work to revive the sluggish housing market.

Other steelmaking ingredients on the DCE exhibited gains on the back of concerns over possible supply disruptions following the latest mining accident.

An accident occurred in a coal mine in the city of Pingdingshan, central China’s Henan province on Friday, causing the death of 13 people and another three missing.

Coking coal and coke climbed 0.39% and 0.23%, respectively.

Steel benchmarks on the Shanghai Futures Exchange were weaker. Rebar dipped 0.69%, hot-rolled coil edged 0.57% lower, wire rod declined 1.94% and stainless steel lost 0.68%.

A batch of industrial metals output data is due to be released on Wednesday.