Iron ore set for second weekly loss on higher supply, concerns over demand

BEIJING: Iron ore prices started on a wobbly footing on Friday, poised for a second straight weekly decline amid prospects of rising supply and seasonally weakening demand, but resilient near-term consumption in top buyer China curbed broad losses.

By 0304 GMT, the most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE) nudged 0.06% lower to 792.5 yuan ($116.53) a metric ton, and were 2.4% down so far this week.

The benchmark June iron ore on the Singapore Exchange, however, was 0.15% higher at $105.95 a ton, a decline of 2.9% so far this week.

The contract touched its weakest level since April 28 at $105.45 earlier in the session.

The sharp jump in the latest weekly shipments from major suppliers Australia and Brazil suggested more arrivals at major Chinese ports in coming weeks. But steel demand in China is set for seasonal weakness when higher temperature curb outdoor construction activities in summer.

Rising supply and softer demand are set to swell port inventories and pressure iron ore prices, analysts said, though solid consumption at present for the key steelmaking ingredient is capping losses.

The average daily hot metal output, a gauge of iron ore demand, rose by 0.6% from the prior week to a seven-month high at 2.41 million tons as of May 21, data from consultancy Mysteel showed.

Coking coal and coke, the other steelmaking ingredients, slid 3.02% and 1.95%, respectively.

“Coking coal inventory at some coking plants have recovered to a reasonable level after a few rounds of restocking,” analysts at Galaxy Futures said in a note.

“Some buyers were resistant about accepting higher coal prices, replenishing only on a hand-to-mouth basis, putting downward pressure on coking coal prices,” they added.

Steel benchmarks on the Shanghai Futures Exchange lost ground.

Rebar dipped 0.5%, hot-rolled coil shed 0.91%, wire rod lost 0.27% and stainless steel fell 0.4%.