Dalian iron ore hits over six-week low as China steel margins narrow

MANILA: Chinese iron ore futures touched a more than six-week low on Thursday, as falling steel prices and slowing demand squeezed steel mills’ profitability, while regulatory concerns weighed on overall sentiment.

The most-traded iron ore for September delivery on the Dalian Commodity Exchange fell as much as 4.8% to 985 yuan ($154.09) a tonne, its weakest since April 12.

“With steel margins now under pressure, we could see iron ore demand starting to soften,” ING commodity strategists said in a note.

Adding to the bearish market, earnings at China’s industrial firms grew at a slower pace in April, with high commodity prices and weaker performance in the consumer goods sector limiting overall profitability from manufacturing, official data showed.

A raft of warnings over the past few days from Chinese government and market watchdogs against commodity price manipulation and speculation has spurred sell-offs, causing prices to collapse from record peaks.

Regulators have also rolled out measures like raising trading limits and margin requirements in efforts to curb “unreasonable” price increases.

Benchmark 62% iron ore’s spot price tumbled to $182 a tonne on Wednesday, SteelHome consultancy data showed, shedding more than a fifth of its May 12 record price of $232.50.

Steel prices in China, the world’s top producer of the construction and manufacturing materials, also continued to soften, with Shanghai futures hitting a more than two-month low on Thursday.

Construction steel rebar on the Shanghai Futures Exchange fell as much as 3.8%, hitting its weakest since March 11, with peak-demand season having ended and rains in some areas likely to slow construction activity.

Hot-rolled coil, which is steel used in car bodies and home appliances, shed 4.1%, touching its lowest since March 23. Stainless steel edged up 0.1% by 0325 GMT. Dalian coking coal rose 1.3%, while coke advanced 0.6%.