SHANGHAI: Iron ore prices fell on Wednesday, dragged lower by thinning steel margins and seasonally weakening demand in top consumer China.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trade 0.57percent lower at 780 yuan (USD115.20) a metric ton. The benchmark July iron ore on the Singapore Exchange slid 1.45percent to its lowest since April 15 at USD103.7 a ton, as of 0811 GMT.
The steel market entered a traditionally slack demand season earlier than usual this year, hit by rains and the earlier onset of high summer temperatures, the state-backed steel association said in a WeChat post late on Tuesday.
Outdoor construction activities are typically constrained by rains and high temperature, dampening appetite for steel products.
“Downstream steel consumption has taken a hit with buying appetite receding, keeping steel and feedstock prices under pressure,” said Xin Ge, deputy director at consultancy Lange Steel.
The mismatch between supply and demand may intensify without timely adjustment on supply, so steelmakers need to prioritise controlling production and lowering inventory, the Chinese steel association said.
“Steel margins have been squeezed by rising coal prices after the mine accident, denting buying interest for feedstocks,” said Lange’s Ge.
Iron ore prices strengthened on Tuesday as state iron ore buyer China Mineral Resources Group (CMRG) told some domestic steelmakers not to engage in discussions with Australia’s Fortescue about a new iron ore product, triggering speculation of a potential purchase ban. But traders and analysts downplayed the potential near-term impact on prices.
Other steelmaking ingredients traded higher, with coking coal and coke up 0.95percent and 0.73percent, respectively. Coking coal prices have gained 18percent since the deadly mine accident in late May that has fanned supply concerns.
Steel benchmarks on the Shanghai Futures Exchange were mostly weaker. Rebar edged down 0.25 percent, hot-rolled coil dipped 0.35percent, wire rod slid 0.56percent, while stainless steel added 0.17 percent.
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