Benchmark Dalian iron ore futures seesawed within a tight range on Wednesday as shrinking inventory of the steelmaking raw material at China's ports kept investors wary about supply prospects, while thin trade volumes suggest waning demand.
The Dalian Commodity Exchange's most-traded iron ore contract, with May expiry, ended down 0.3% at 664 yuan ($96.41) a tonne, after rising as much as 0.8% earlier in the session.
The front-month February contract on the Singapore Exchange, however, was down 1.1% at $93.85 a tonne in afternoon trade.
On Tuesday, the spot price of the benchmark 62% iron-content ore, as tracked by SteelHome consultancy, jumped $1.80 to $96.50 a tonne, the highest since mid-September last year, as futures prices rose on supply-related concerns.
Trading volumes in both spot and futures markets, however, have declined since the start of the year as mills' and traders' restocking activity ahead of the Lunar New Year holidays later this month may be coming to an end.
Iron ore inventory at China's ports had fallen for two straight weeks to 127.90 million tonnes as of Jan. 10, the lowest since mid-December last year, based on SteelHome data.
China's iron ore imports in January are expected to drop on a year-on-year basis as shipments from top suppliers Australia and Brazil declined last month, according to Helen Lau, metals and mining analyst at Argonaut Securities in Hong Kong.
It normally takes around one month to ship Australian iron ore to Chinese ports, she said.
"This, coupled with a declining inventory at ports - down 5% since November due to strong steel production - should continue to underpin iron ore price recovery," Lau said.
Spot and futures prices have so far risen more than 3% this year, adding to last year's gains, driven by worries over supply and still-robust demand from China, which makes half of the world's steel supply.
China's steel production is expected to grow only modestly this year, driven by rising urbanisation and Belt and Road Initiative projects, Australia's Fortescue Metals Group chief executive Elizabeth Gaines said on Wednesday.
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