Iron Ore Prices Plunge to Four-Month Low Amid Pessimistic Market Sentiment and Sluggish Demand

Singapore's benchmark September iron ore futures contract fell 3.4% to $95.2 per ton, hitting the lowest level since May 2023. Concerns over a slowing economy have cast a shadow over investment demand in commodities such as crude oil, metals, and agricultural products. Hedge funds' bearish sentiment toward commodities has reached its highest level in 13 years, underscoring the prevailing market pessimism. Iron ore prices have been under pressure due to weak demand and high inventory levels. The latest data indicates a reduction in global shipping volumes, with iron ore shipments from Australia and Brazil declining. For the week of August 5 to August 11, total Australian and Brazilian iron ore shipments were 24.433 million tons, down by 926,000 tons compared to the previous week. China-bound shipments from Australia decreased by 106,400 tons to 14.138 million tons, reflecting broader concerns about demand from the world's largest steel producer. On August 14, iron ore futures saw significant declines, with the main contract price dropping to 715.0 yuan, a 3.05% decrease. Trading volumes were also down, with a substantial drop in nationwide iron ore transactions at major ports. This trend is further exacerbated by a build-up in iron ore inventories at Australian and Brazilian ports, which increased by 62,000 tons to a high for the third quarter. Industry analysts from mainly point to constrained supply and declining demand as key factors influencing the market. Reduced iron ore shipping from external mines and domestic production cuts have somewhat alleviated port inventory pressures. However, the sluggish demand for steel products and declining hot metal output have surpassed expectations. Steel mill profits remain low, posing a continued risk for market stability. Current market sentiment reflects a complex interplay of factors. As demand continuously weakens amidst limited supply contraction, the iron ore market's fundamentals remain strained. However, the low valuation of iron ore has limited its downside potential. Looking ahead, market participants are keeping an eye on the price movements of finished steel products for further guidance. The battle between supply limitations and demand weakness suggests that iron ore prices may continue to fluctuate at lower levels, subject to the broader economic and industrial trends.