FX.co ★ Iron Ore Eases from 6-Week High

Iron ore futures have dipped to CNY 720 per tonne, retreating from the six-week peak of CNY 740 reached on May 14th. This decline stems from expectations of weakened demand for ferrous metals, which overshadowed the positive strides in trade relations between China and the United States. Beijing has hinted at the possibility of banning property developers from pre-selling homes, a policy that would cut off a vital funding source for these firms. This restriction could exacerbate financial strain within the heavily indebted property sector, leading to significant liquidations and reducing demand in the global steel markets. If confirmed, these changes would align with Beijing’s indications that it may reduce steel production quotas to address the issue of oversupply. Speculations were further fueled when Baosteel announced that the government might impose a mandate to cut production by 50 million tonnes. Despite this, futures remain well above the seven-month low of CNY 690, buoyed by the mutual reduction of tariffs by China and the US, which has alleviated fears that trade disruptions could trigger economic recessions.