Iron-ore fell for the first time in nine sessions as Goldman Sachs Group warned that property weakness would likely be a multi-year 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 Beijing stepped up wider measures to revive its stalled recovery, and also on hopes for more targeted policy to improve the property market, a key source of demand for the steel-making ingredient. 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.
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.
Iron ore fell as much as 4.8% to $107.15 a ton before trading at $107.40 as of 10:38 a.m. in Singapore. Futures in Dalian fell 3%, while steel rebar and hot-rolled coil futures dropped more than 1.5% in Shanghai.