FX.co ★ Iron Ore Holds Near 6-Month Low

In May, iron ore futures in China were hovering around CNY 715 per tonne, stabilizing within a tight range following a decline to six-month lows below CNY 700 in April. This fluctuation occurred as markets evaluated a mixed forecast for demand in the ferrous metal sector, particularly within China, the world's largest consumer. A recent round of negotiations led to mutual tariff reductions between China and the US, easing their trade tensions and bolstering the outlook for global manufacturing and construction industries. However, this outlook is tempered by potential policy changes from Beijing, which might restrict property developers from selling unfinished homes, thereby eliminating a crucial financing method for many companies. Such a restriction could exacerbate financial stress in the debt-heavy real estate sector, leading to significant liquidations and reducing demand within global steel markets. If these changes are enacted, it could lead to an oversupply of ferrous metals in China, prompting Beijing to mandate production cuts. Notably, Baosteel has indicated a potential 50 million tonne reduction, awaiting government approval.