Iron ore futures declined on Wednesday due to the tariff war between the United States and top metals consumer China, outweighing optimism about improved demand for Chinese steel. China is the world’s largest consumer of metals, including iron ore, a key raw material for steel production.
According to reports, the most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) closed 1.34% lower to 771 yuan ($106.18) per metric ton. The benchmark April iron ore on the Singapore Exchange was down 1.42% at $99.4 a ton, as of 0705 GMT.
As U.S. President Donald Trump imposed duties on countries, he had doubled the duties on Chinese goods to 20%, taking effect on Tuesday, leading to a swift retaliation from Beijing and prompting trade war concerns. Reports say that Beijing increased import tariffs on $21 billion worth of U.S. agricultural and food products while also suspending soybean import licenses for three American companies and halting log imports.
“Sentiment was also impacted by the prospect of further tariffs,” ANZ analysts said.
On Wednesday, China introduced additional fiscal stimulus, pledging stronger efforts to boost consumption and alleviate the effects of the intensifying trade war with the United States. Key measures include a major expansion of Beijing’s trade-in scheme, which was launched last year. U.S. tariffs on steel and aluminium are to begin on March 12.
China has also made a statement that it is to restructure its giant steel industry with output cuts even though they did not detail any targets as they deal with the issues of overcapacity in the sector. Chinese consultancy Mysteel also responded that they predict to strengthen both supply and demand of imported iron ore in China by March, when the steel consumption in the country is mostly robust.
“This should keep prices of the steelmaking material firm,” they said.
Most steel benchmarks on the Shanghai Futures Exchange have declined. Rebar dipped 0.7%, hot-rolled coil fell 0.56%, and wire rod eased nearly 0.8%, while stainless steel posted a modest gain of 0.38%. Other steelmaking ingredients on the DCE declined, with coking coal and coke losing 3.32% and 2.66%, respectively.