(Bloomberg) -- Industrial metals from copper to iron ore slumped as investors reacted to the ongoing weakness in China’s property sector and inflationary pressures that could keep global monetary policy tighter for longer.
Iron ore tumbled as much as 4.7% on Monday. Demand for steel typically accelerates ahead of the National Day holiday period, but this year buyers are holding back amid persistent weakness in China’s property market. Chinese property stocks tumbled as concern over a possible China Evergrande Group liquidation added to fresh signs of stress across the industry.
Copper, aluminum and zinc all lost more than 1% on the London Metal Exchange, tracking losses in global equity and bond markets as investors become increasingly concerned that rising oil prices risk fanning inflation, which will make it difficult for policymakers to reduce rates anytime soon.
China, the world’s biggest consumer of iron ore and other commodities, is still struggling to shake off its post-pandemic economic malaise. Some market watchers have been disappointed by Beijing’s efforts to support the construction industry, despite pro-growth pledges for the real estate industry from the Politburo.
“It’s been nearly two months since Beijing increased supportive rhetoric toward the economy at the July Politburo meeting, but there’s been no subsequent follow through in terms of significant funding commitments,” Astris Advisory Japan commodities strategist Ian Roper said.
“Meanwhile, demand from housing and infrastructure construction — if anything — continues to worsen,” he added, forecasting that expected steel output cuts in the fourth quarter would push iron ore prices toward $90 a ton.
Less than half of at least 90 downstream construction companies planned to replenish their inventories before the holiday, with most expecting further price softening on weak demand, according to a survey by Mysteel. Among enterprises that focus on infrastructure projects, 43% have plans to restock steel, and of firms that mainly see to housing projects, the figure falls to 41%, it said.
Singapore iron ore futures were 4.3% down to $116 a ton in as of 10:59 a.m. in London, after falling to a two-week low earlier Monday.
All metals were lower on the LME, led by zinc’s 1.4% decline. Copper and aluminum were both down about 1%.
--With assistance from Winnie Zhu.
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