Trade credit doubts hit as demand for black commodities cools! Iron ore falls below $95, breaking through a year-long "trust bottom."

Due to severe concerns in the market regarding a major iron ore physical trader, coupled with an already weak market exacerbated by grim demand prospects, iron ore prices have fallen to their lowest levels in over a year. The latest prices and industry data for iron ore, rebar, and other commodities indicate a weakening demand for black commodities and a downward shift in price centroids. The black commodities sector is currently approaching a demand-driven decline and bottoming phase. In the short term, if Asia implements stimulus for infrastructure, real estate, or equipment renewal, combined with an easing of trade credit issues, prices might experience a technical rebound. The price of iron ore on the Singapore Exchange, a key raw material for steelmaking, dropped by 1.9% to $94.10 per ton, marking the lowest intraday level since early July 2025. On the Dalian Commodity Exchange in China, the most actively traded contracts fell nearly 3%. Media reports last Friday indicated that commodity trading giants Vitol Group and Cargill have ceased commodity trading activities with the privately-owned Radiant World due to concerns over false invoicing. Additionally, Italy's UniCredit Bank and Wall Street financial giant Jefferies Group's Point Bonita fund are reviewing their risk exposure to the company. Radiant World, which has developed into a major player in the market in recent years, stated that these situations are "completely unfounded." As shown in the above illustration, market worries are intensifying, causing iron ore to continue its downward trend. Note: The Singapore Exchange has adjusted the iron content requirement for iron ore from 62% to 61% beginning this year. Due to concerns over deteriorating fundamentals in the steel industry, black commodities such as iron ore have already faced pressure. Last week, profit margins for Chinese steel mills further weakened, and molten iron production from blast furnaces declined for the fourth consecutive week. In this largest economy in Asia, commercial building activity has dropped to its lowest level since the outbreak of the COVID-19 pandemic, while factory activity contracted for the first time in five months in July. Molten iron production is the most critical high-frequency indicator of the actual demand for iron ore and coke from blast furnaces. Its continued decline signifies that steel mills are controlling losses by reducing maintenance, lowering blast furnace utilization rates, and cutting back on raw material procurement. The typical negative feedback loop in the black commodities sector is as follows: Cooling construction and manufacturing demand Falling steel prices Shrinking steel mill profits Reduced production from blast furnaces and decreased molten iron output Reduced demand for iron ore and coke Continued decline in raw material prices. Horizon Insights analyst Bancy Bai stated that after media reports concerning Radiant World were released, traders may be closely monitoring any significant negative changes in the liquidity of black metals. She noted, "As of now, no significant anomalies have been observed in the spot market." At 10:41 AM local time, the benchmark iron ore futures in Singapore with 61% iron content dropped by 1.6% to $94.35 per ton. Previously, this futures contract had fallen for three consecutive months, marking the longest streak of monthly declines in over a year. In the Shanghai market, steel futures contracts priced in RMB also saw declines. Black commodities are undergoing a negative feedback loop driven by constricting terminal demand, worsening steel mill profits, and relatively loose raw material supply. The Radiant World trade credit incident merely accelerated the liquidity shock that exacerbated the downward trend and is not the root cause. The weakness of iron ore and construction steel is the clearest, while coking coal and coke may experience temporary counter-trends due to mine safety inspections, import disruptions, or episodic restocking. Iron ore supply is growing faster than steel demand, and it appears there continues to be an increase in the supply side of black commodities. Global iron ore supply is expected to increase by around 2.5% by 2026, with new low-cost capacities gradually entering the market, such as Guinea's Simandou, and Australian miners have not significantly reduced their long-term shipment plans. A downward shift in the demand centroid combined with increased shipping supply will make it easier for iron ore to transition from a "tight balance" to a "persistent surplus." The core of the current weakness in black commodities is not a single macro data point, but rather the simultaneous downward trend of three significant cycles: the demand cycle, the steel mill profit cycle, and the inventory and supply cycle for black commodities. The Radiant World incident affects spot trade credit, financing, and liquidity. The cessation of trades by Vitol and Cargill, the suspension of new business by Glencore, and the review of related exposures by UniCredit Bank and Jefferies' fund will lead banks, traders, and cargo owners to raise margins, tighten credit, and reduce inventory risks. Commodity trading is highly reliant on letters of credit, invoice financing, and inventory pledges; once market participants question the authenticity of trading documents, some may sell spot or futures to mitigate risk, which can amplify the downward pressure on iron ore prices in the short term. Radiant World has denied the related allegations. However, if steel mill profits, molten iron production, and construction demand were truly robust, credit concerns surrounding a trader would typically only lead to temporary fluctuations. The price hitting a year-low is a result of the credit incident coinciding with weakening demand, high inventory levels, and increasing supply, with these two pressures reinforcing each other.