(Bloomberg) — After posting the biggest weekly gain of the year, iron ore futures contracts in Singapore retreated on the cautious outlook of the world’s largest steelmaker for the price of the product.
The price of this raw material for steelmaking recovered last week, with investors betting on a resumption of demand later in the year. However, Baoshan Iron & Steel, the exchange-listed division of China’s biggest producer, signaled the possibility of further declines. At the same time, the company reported that its net profit tripled in the first quarter.
Iron ore prices “have entered a downward trend” with the implementation of China’s restrictions on steel production, Baosteel chairman Zou Jixin said during a virtual presentation on Monday. The company has been following the strategy of keeping low stocks of raw materials, added the executive.
The move by China’s steel industry to cut production this year has shaken iron ore markets in recent months. In Singapore, futures contracts fell by almost a third from the record set in May. Investors are weighing a complex set of factors that include the possibility of new Covid-19 outbreaks and the crackdown by regulators on the Chinese real estate sector.
The latest sign of pressure on steel production came from the southwestern Guangxi province of the country, which has ordered local steelmakers to cut production to reduce energy use, according to research from research firm Mysteel. The stoppages could result in about 980,000 tonnes less production in September, according to the study.
Baoshan shares rose to the highest since 2018 on Monday after the company reported a jump in profits thanks to higher prices earlier in the year. However, prices are expected to decline during the rest of 2021, the company added in the statement accompanying the financial statements.
Australia’s Fortescue Metals Group, the world’s fourth-largest producer of iron ore, posted record profits on Monday due to rising iron ore prices earlier in the year. Stocks at ports remain “stable at low levels” and exports to China and other countries are robust, the miner said in its results presentation.
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