FX.co ★ Iron Ore Tests 7-Month Low

In May, iron ore futures in China declined to CNY 700 per tonne, marking the lowest point in seven months. This drop is attributed to looming macroeconomic challenges and expected regulatory reforms, which are likely to impact demand for ferrous metals in the country. Recent reports have suggested that Beijing may impose restrictions on property developers, preventing them from selling homes prior to their completion. Such a move would eliminate a critical source of financing for the sector, adding financial strain to an already indebted industry. This development raises the risk of substantial liquidations and would potentially curtail a significant avenue of demand within global steel markets. Should this policy be enacted, it would exacerbate the existing oversupply of ferrous metals in China, possibly prompting Beijing to enforce production cuts. Baosteel has indicated that there is a strong possibility the central government will require a nationwide reduction in steel production to address overcapacity and diminishing demand. Although the government has not disclosed the specifics of the potential reduction, reports suggest that the output could decrease by as much as 50 million tonnes this year.