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Iron ore futures may fall further than the nearly seven-month low reached on Monday, favouring Indian steelmakers due to excess stocks and sluggish Chinese demand. Iron ore futures due in May 2024 began 4.27% lower, hitting $110 per tonne on Monday, marking their lowest price since August 2023. It dropped 11.66% during the previous month.
The pricing decline indicates over 25% since the peak in early January. This opposes ongoing pressure on China's manufacturing and real estate sectors. The primary cause of the notable decline in Chinese steel demand is the muted construction activity resulting from the government's continuous crackdown on property debt.
The predicted upturn has not materialised despite hopes of a post-Lunar New Year construction resurgence. Analysts predict that given that inventories at Chinese ports are rising to their greatest levels in a year, iron ore prices may see additional decreases in the near future.
"Lower than anticipated steel demand post-Chinese New Year and high producer inventory have led to steel mills pushing out the buying of iron ore," he said. "At the same time, iron ore supply in Australia has been picking up as we come to an end of cyclone weather."
Steel makers may gain from the recent price decline, as iron ore is a critical raw ingredient in the steel industry. The price decrease may benefit companies, including Tata Steel Ltd., JSW Steel Ltd., Steel Authority of India Ltd., Jindal Steel & Power Ltd., Hindalco Industries Ltd., and Kalyani Steels Ltd..
Falling iron ore futures prices have a direct influence on iron ore mining companies' revenue, resulting in lower profitability. Companies like NMDC Ltd. and Vedanta Ltd. could likely witness a decline given the drop in iron ore prices.
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