Iron ore dips as traders unwind positions ahead of China holiday

SINGAPORE: Iron ore futures drifted lower on Friday as traders closed their positions ahead of a week-long Lunar New Year holiday in China, during which demand is expected to drop significantly.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) was down 1.51% at 752.5 yuan ($108.97) a metric ton, as of 0322 GMT. The contract has lost 1.63% so far this week.

The benchmark March iron ore on the Singapore Exchange was trading 1.24% lower at $98.35 a ton.

The contract has lost 0.7% so far this week.

It is on track for a fifth consecutive weekly decline, if the current momentum holds.

Trading volumes for Dalian iron ore, which had fallen for six consecutive sessions, picked up, according to data compiled by LSEG, likely as traders closed out positions ahead of the week-long Chinese New Year holiday from February 16 to 23.

Meanwhile, shipments from Australia declined after tropical cyclone Mitchell formed off the coast of the resource-rich Pilbara region last week.

Hot metal production at 229 thermal-monitored furnaces has continued to pull back, as operators hot bank or idle their furnaces ahead of the holiday, said Atilla Widnell, managing director at Navigate Commodities.

Demand for feedstock is expected to decrease significantly during the holiday, during which most steel mills will shut down for a break or undergo planned maintenance.

In news, Brazil’s trade body has decided to impose anti-dumping measures against coated flat steel and cold-rolled flat steel from China.

Brazilian miner Vale posted a net loss of $3.8 billion in its fourth-quarter results.

Still, its iron ore production costs saw a 2% reduction year-on-year, marking the second consecutive year of cost reduction, according to the company’s financial report.

Other steelmaking ingredients on the DCE moved in different directions, with coking coal down 0.36% and coke up 0.87%.

Most steel benchmarks on the Shanghai Futures Exchange advanced.

Rebar gained 0.2%, hot-rolled coil firmed 0.06% and stainless steel hardened 0.12%. Meanwhile, wire rod dropped 2.24%.