Iron ore falls on demand concerns following an accident at Chinese steel mill

SINGAPORE: Iron ore futures fell for a fourth straight session on Tuesday, as an accident at a Chinese steel factory triggered concerns over demand for the steelmaking ingredient.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) traded 1.44% lower at 786 yuan ($112.92) a metric ton, as of 0250 GMT.

The benchmark February iron ore on the Singapore Exchange was 0.63% lower at $104.66 a ton.

An explosion at a steel plate factory in China’s northern region of Inner Mongolia on Sunday killed six people and left 84 people injured, Inner Mongolia Baotou Steel Union, whose subsidiary owns the factory, said in a stock exchange filing earlier on Monday.

News of the accident stoked fears amongst investors over a decrease in hot metal output, and of imminent government safety checks of steel mills across the country, which would impact demand for feedstocks.

It is expected that the accident may affect two blast furnaces, with daily average hot metal production of approximately 16,000 mt, the Shanghai Metals Market said in a note.

BHP Group has accepted lower prices for some iron ore during annual contract negotiations with China, it said on Tuesday, as it reported record first-half production of the key steelmaking ingredient.

BHP, the world’s largest listed miner, reported a 9% rise in its second-quarter iron ore output relative to the first quarter on Tuesday.

Since September, state-owned iron ore buyer China Mineral Resources Group (CMRG) has ordered steel mills and traders to stop purchasing multiple grades of BHP iron ore as it seeks better terms for domestic steelmakers.

Other steelmaking ingredients on the DCE languished, with coking coal and coke down 2.55% and 2.54%, respectively.

Steel benchmarks on the Shanghai Futures Exchange were mixed.

Rebar shed 0.7%, hot-rolled coil fell 0.76%, wire rod softened 0.78%.

Meanwhile, stainless steel rose 0.35%.