Iron Ore Falls Approaches 1-Year Low

Iron ore futures in China dropped to under CNY 710 per tonne, approaching the one-year low of CNY 695 in early August as low demand and risks on financing trade. Iron ore trading giant Radiant world disclosed $870 million outstanding to six different trade financing firms, detailing the exposure of different creditors to the firm accused of fabricating invoices to secure funding, which has currently not been paid back. The crisis to the major trader halted a large source of physical iron ore liquidity. On top of halting a sector of the trading market, the developments are also due to tighten funding rules for other traders, having already been responsible for the sharp decline in ore futures in late July. Meanwhile, softening demand for construction and manufacturing in China also dented ferrous metal buying. New yuan loans were sharply under historical averages in August, and the construction PMI fell to a record low.