Iron ore fell for the first time in nine sessions as Goldman Sachs Group Inc. warned that property weakness would likely be a multiyear growth drag for China’s economy.
(Bloomberg) — Iron ore fell for the first time in nine sessions as Goldman Sachs Group Inc. warned that property weakness would likely be a multiyear growth drag for China’s economy.
The steel-making staple dropped almost 5% in Singapore after the investment bank said in a note that it sees persistent problems in Chinese real estate, mainly related to lower-tier cities and private developer financing. There was no quick fix and the property recovery was likely to be “L-shaped,” according to Goldman.
The warning comes after iron ore jumped 14% over the previous eight sessions as authorities stepped up wider measures to revive the stalled recovery, and also on hopes for more targeted policy to improve the property market. However, Goldman said it didn’t expect more housing-specific stimulus and suggested Beijing would likely seek to reduce economic and fiscal reliance on the sector.
“We noticed some bulls are exiting as investors are cautious in chasing a rally like this,” said Wei Ying, an analyst at China Industrial Futures Co. “After all, the iron ore market will be in a slight surplus in the second half and we expect inventories at Chinese ports to increase.”
Iron ore fell as much as 4.9% to $107.05 a ton before trading at $108.90 as of 3:02 p.m. in Singapore. Futures in Dalian closed 3.3% lower, while steel rebar and hot-rolled coil futures dropped more than 1.5% in Shanghai.
Goldman’s warning comes after Citigroup Inc. said last week that a major turnaround in Chinese steel demand was unlikely in the absence of a strong rebound in the property sector. The bank cut its iron ore forecast to $100 a ton for the third quarter and $90 for the final three months of the year.
China’s daily crude steel output will likely drop to 2.94 million tons in early June, down 0.5% from late May and 1.6% from a year earlier when the economy was still hobbled by virus restrictions, researcher Mysteel said in a note.
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