Dalian iron ore futures fall as demand further weakens

An employee inspects some steel at the plant of German steel company Salzgitter AG in Salzgitter, Lower Saxony late November 10, 2011. REUTERS/Fabian Bimmer

Chinese iron ore futures fell on Friday amid concerns that steel mills will further cut output due to shrinking demand, weighing on consumption of the raw material in top user China.

The benchmark May iron ore futures contract on the Dalian Commodity Exchange closed 2.4 percent lower at 302.5 yuan ($47.31). It rose 1.3 percent this week. Colder weather in northern regions is also expected to interrupt construction activities, a main consumer of steel products, forcing steel mills to curb output, while slower economic growth has already hurt demand for industrial metals. “Iron ore prices are coming back to a rational range as fundamentals remain fragile.

Steel mills are cutting output due to extreme tightness in cash flow and poor orders, so we see iron ore stocks at ports rise that will pressure the raw material,” said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen. Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI gained 0.5 percent to $43.60 a tonne on Thursday, after falling earlier in the week to its lowest since The Steel Index compiled indices in 2008. Prices were on track for a 3 percent fall this week.

The most-traded rebar futures contract on the Shanghai Futures Exchange dropped 2.1 percent to 1,656 yuan by close. The contract lost 2 percent this week.

[reuters]

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