SINGAPORE: Iron ore futures prices slumped on Wednesday, as Chinese traders returned after the country’s Mid-Autumn Festival holiday to a bleak market outlook for the key steelmaking ingredient, weighed down by prospects of firm supply and soft steel demand.

The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) ended morning trade 4.33% lower at 673.5 yuan ($94.91) a metric ton. The benchmark October iron ore on the Singapore Exchange was 2.18% lower at $90.2 a ton, as of 0331 GMT.

Goldman Sachs on Monday cut its iron ore price forecast for the fourth quarter of 2024, citing market oversupply even though demand from China is stabilising.

“We note potential price support from pre-Golden Week holiday restocking over the next two weeks, but a continuing build in total iron ore stocks is setting the scene for another price drop in October,” analysts at the bank said in a note, referring to China’s annual week-long holiday next month.

During August, Chinese iron ore port inventories surged to a fresh 29-month high while steel inventories at major mills grew to a seasonal two-year high, Westpac analysts said.

At the same time, steel mill profitability dropped to a multi-decade low in late August, they added. China’s crude steel output in August declined for the third straight month, posting a 6.1% month-on-month loss and a 10.4% fall from a year before, as steelmakers grappled with losses from a decline in steel prices.

The Biden administration on Friday locked in steep tariff hikes on Chinese imports, including a 25% duty on steel, which takes effect on Sept. 27.