Iron Ore woes deepen as inventories keep piling up

Beijing: Iron ore slumped more than 7% – dropping below the $110 a ton mark – as disappointing demand in China left the market lumbered with bulging inventories.

The steelmaking material has tumbled by around a quarter from a peak in early January as China’s real estate and manufacturing activity remained under pressure. The annual National People’s Congress in Beijing, which concludes Monday, offered few prospects of a demand boost, and iron ore stockpiles at ports have ballooned to the highest in a year.

Iron ore futures fell 7.2% to $106.95 a ton in Singapore as of 4:55 p.m. local time and were headed for the lowest close since August. Futures in Dalian dropped 5.3%, while steel contracts in Shanghai were also down.

“Prices will have to drop further for inventories to be withdrawn,” Jinrui Futures Co. said in a note. The broker suggested building short positions in iron ore before Chinese steel demand picks up.

Construction activity remains lackluster as China’s yearslong crackdown on property debt squeezes a vital source of steel demand, while Beijing has refrained from deploying the type of massive infrastructure stimulus that it has used to revive the economy in the past. There had been hopes for a stronger pick-up in construction after the Lunar holiday that ended in mid-February, but that hasn’t eventuated.