Iron ore futures experienced a downturn on Wednesday as escalating trade tensions between the United States and China overshadowed optimism surrounding China’s steel demand recovery.
The May iron ore contract on China’s Dalian Commodity Exchange (DCE) fell by 1.34%, closing at 771 yuan ($106.18) per metric ton. Meanwhile, the April iron ore contract on the Singapore Exchange dropped by 1.42%, reaching $99.4 per ton as of 0705 GMT.
The latest decline followed U.S. President Donald Trump’s decision to double tariffs on Chinese goods to 20%, which took effect on Tuesday. Beijing quickly retaliated, implementing new tariffs on $21 billion worth of American agricultural and food products. Additionally, the Chinese government suspended soybean import licenses for three U.S. companies and halted log imports, raising concerns over a deepening trade conflict.
ANZ analysts noted that market sentiment was also negatively impacted by the possibility of further tariffs, particularly as U.S. duties on steel and aluminum are set to take effect on March 12.
In response to the trade war, China introduced additional fiscal stimulus measures on Wednesday, including expanded efforts to support domestic consumption. The government also promised to restructure its steel industry, focusing on output reductions, though no specific targets were announced to address overcapacity.
Chinese consultancy Mysteel highlighted that both supply and demand for imported iron ore in China are expected to increase in March, a period typically marked by strong steel consumption. This outlook is expected to help maintain iron ore prices in a relatively firm range despite the trade tensions.
On the Shanghai Futures Exchange, most steel benchmarks saw losses. Rebar fell by 0.7%, hot-rolled coil decreased by 0.56%, and wire rod dropped by nearly 0.8%. Stainless steel, however, posted a modest gain of 0.38%. Other steelmaking ingredients on the DCE, such as coking coal and coke, also saw declines of 3.32% and 2.66%, respectively.
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