Iron ore falls as stocks climb, China steel mills finish restocking

SINGAPORE: Iron ore futures edged lower on Monday as Chinese inventories rose and steel mills wrapped up restocking, while feedstock demand and transactions are expected to remain sluggish ahead of the Lunar New Year.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) fell 0.63% to 788 yuan ($113.37) a metric ton, as of 0257 GMT.

The benchmark March iron ore on the Singapore Exchange was 0.42% lower at $103.35 a ton. Iron ore inventories at major Chinese ports rose 1.16% week-on-week, according to data from consultancy Steelhome released on January 30.

Around 80% of surveyed steel mills have finished restocking, and inventories of finished steel products have also been accumulating, indicating that iron ore demand is expected to remain weak, a note from the Shanghai Metals Market said.

Due to environmental protection restrictions, blast furnaces in Hebei may cut back on hot metal production, the note said.

End-user demand and transactions are expected to be sluggish prior to the Chinese Lunar New Year holiday, a note from Mysteel said.

Support for steel prices would depend on how fast activity can resume after the holiday and accumulated inventory can be ingested, the note added.

China’s factory activity faltered in January as weak domestic demand dragged down production at the start of the new year, an official survey showed on Saturday.

However, a private-sector survey released on Monday showed contrasting results, claiming that factory activity expanded in January as export orders rebounded and output growth accelerated.

Other steelmaking ingredients on the DCE lost ground, with coking coal and coke down 0.98% and 1.44%, respectively.

Steel benchmarks on the Shanghai Futures Exchange declined.

Rebar shed 1.24%, hot-rolled coil slipped 0.91%, wire rod fell 4.57% and stainless steel lost 0.37%.