Iron ore falls as high prices deter buying appetite

SINGAPORE: Iron ore futures drifted lower on Friday as high prices and slim margins deterred buying appetite in top consumer China.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) traded 0.43% lower at 812.5 yuan ($116.64) a metric ton, as of 0330 GMT.

The contract has lost 0.25% so far this week.

The benchmark February iron ore on the Singapore Exchange was 0.34% lower at $106.7 a ton.

Total stocks of imported iron ore across China’s major ports increased for the eighth straight week to a record high of 165.6 million tons, according to Mysteel data released on Janaury 15.

However, steel mill stocks fell 2.1% week-on-week and transaction volumes of portside iron ore dropped 20.3% week-on-week, as high prices and slim margins made steel mills hesitant about buying more ore.

Two of the world’s top miners, Rio Tinto and BHP, have partnered to extract up to 200 million metric tons of iron ore from two adjoining sites in of Western Australia’s Pilbara region.

Iron ore shipments to China already reached record highs in December, with shipments expected to grow in 2026.

Compounded by diminishing domestic steel demand and weaker fundamentals, iron ore prices are expected to move lower in the medium term, said Chinese broker Galaxy Futures.

However, China’s central bank announced that it will cut interest rates on various structural monetary policy tools, and will also lower interest rates on one-year re-lending facilities.

Additionally, the bank said that there is still room for cutting rates this year.

Easier funding access and looser monetary conditions have thus increased investors’ risk appetite. Other steelmaking ingredients on the DCE weakened, with coking coal and coke down 1.09% and 1.29%, respectively.

Steel benchmarks on the Shanghai Futures Exchange mostly firmed.

Rebar steadied 0.16%, hot-rolled coil gained 0,36% and wire rod grew 0.46%.

Meanwhile, stainless steel shed 0.1%.