Dalian iron ore dips as environmental curbs dampen demand

BEIJING: Benchmark iron ore futures in China dipped on Wednesday as environmental policies weighed on demand for the steelmaking ingredient, though upbeat profit at mills limited losses.

"Overall steel products' consumption is picking up steel firms are showing a certain demand for raw materials under rapidly recovering profit," Huatai Futures wrote in a note.

However, analysts with Sinosteel Futures noticed the game between environmental curbs and profit-driven output gain could lead to price fluctuations in the short term.

Positions for the most-traded iron ore futures on the Dalian Commodity Exchange, for May delivery, fell sharply by 40,517 lots on Tuesday, while the September contract gained 9,543 lots.

Prices for May iron ore contract was down 0.4% at 1,091 yuan ($166.25) a tonne, as of 0330 GMT on Wednesday, and the September contract fell 0.7% to 953 yuan a tonne.

The environment regulator in China's top steelmaking city Tangshan recently sent 100 people to 25 local mills to ensure the steel plants follow production-control policies.

"The change of most active iron ore contract will be completed soon," Sinosteel Futures said, adding that September contract is riding on expectations of strict environmental restrictions and lenient supply and demand.

Spot prices of iron ore with 62% Fe content for delivery to China, compiled by SteelHome consultancy, dropped by $2 to $166 a tonne on Tuesday.

Other steelmaking ingredients were mixed, with Dalian coking coal slipping 0.8% to 1,650 yuan a tonne, while coke inched up 0.5% to 2,289 yuan per tonne.

Steel rebar on the Shanghai Futures Exchange, used in construction activities, slipped 0.3% to 4,951 yuan per tonne.

Hot-rolled coil, used in cars and home appliances, increased 0.1% to 5,363 yuan on upbeat economic data.

China's official manufacturing PMI in March expanded at the quickest pace in three months, data from statistics bureau showed, and export orders returned to growth on improving foreign demand.

Shanghai stainless steel futures fell 1.8% to 14,360 yuan a tonne.