MANILA: Chinese iron ore futures fell 2 percent on Monday as stockpiles of the steelmaking commodity at China's ports surged to the highest since at least 2004, with weaker steel prices also adding pressure.
Steel producers say supply in China remains excessive despite production curbs imposed by Beijing to battle smog, suggesting prices could remain under pressure.
"The oversupply condition still exists and there is room for steel production to grow and there won't be a supply shortage," Jin Wei, chairman of major Chinese steelmaker Shougang Group, was quoted as saying by the website of the China Iron and Steel Association on Saturday.
Jin also said the recent spike in iron ore prices was not sustainable given the continued increase in stocks of the bulk commodity at China's ports.
"Iron ore supplies kept rising and port inventories kept testing records, while scrap supplies are also increasing, so there is no basis for iron ore prices to sustain gains."
The most actively-traded iron ore contract on the Dalian Commodity Exchange fell 2 percent to end at 536.50 yuan ($83) per tonne.
Dalian iron ore futures touched a four-month high of 565 yuan a tonne on Jan. 10, pulled up by firmer steel prices then, and helping lift spot iron ore prices to $79.08 a tonne on Jan. 11, the strongest since Aug. 22.
Iron ore for delivery to China's Qingdao port slipped 1.3 percent to $78.05 per tonne on Jan. 12, according to Metal Bulletin.
Inventory of imported iron ore at China's ports reached 152.83 million tonnes as of Jan. 12, up 2 million tonnes from the previous week and the most since at least 2004, data compiled by SteelHome consultancy showed.
Chinese data released on Friday showed the country's iron ore imports fell 11 percent in December from the previous month, but full-year shipments surged to a record 1.075 billion tonnes.
As China's iron ore stockpiles topped 150 million tonnes last week, "we think that weaker iron ore imports should be expected in the first quarter of 2018 as the market moves out of a restocking cycle," Barclays analysts said in a note.
The most-traded rebar on the Shanghai Futures Exchange closed 0.1 percent lower at 3,802 yuan a tonne, well off the day's trough of 3,749 yuan.
Coking coal dropped 2 percent to 1,327 yuan a tonne and coke fell 1.5 percent to 1,984 yuan.
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