Dalian iron ore flat as hot metal output rises amid weak demand

SINGAPORE: Dalian iron ore futures struggled for direction on Wednesday, with traders weighing a likely rise in hot metal output against a broader weak sentiment as end-use demand slows.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) traded flat at 784 yuan ($113.01) a metric ton, as of 0326 GMT. The benchmark March iron ore on the Singapore Exchange was 0.98% higher at $103 a ton.

While hot metal output is expected to rise week-on-week, restocking by steel mills has temporarily ended, Shanghai Metals Market said in a note.

Production of finished steel products such as rebar and hot-rolled coil accelerated last week, pushing inventories higher as steel mills continued to stock up, Chinese broker Galaxy Futures said.

With the Lunar New Year approaching, most construction sites have stopped work, and end demand has gradually weakened, said Chinese broker Everbright Futures.

A lack of fundamental catalysts, compounded by dampened sentiment, will continue to weigh on ore and steel prices, Galaxy Futures added. Other steelmaking ingredients on the DCE gained, with coking coal and coke up 4.88% and 3.25%, respectively.

Prices of coking coal and coke are expected to be more volatile and less driven by fundamentals, as liquidity thins ahead of the holidays, said Galaxy Futures.

Supply for both coking coal and coke is currently stable, but several private mines have halted production ahead of the holidays, tightening supply, said Everbright Futures.

Most steel benchmarks on the Shanghai Futures Exchange advanced.

Rebar firmed 0.29%, hot-rolled coil strengthened 0.46% and wire rod increased 1.73%. Meanwhile, stainless steel shed 0.32%.