Iron ore dragged down by falling steel prices


Dalian and Singapore iron ore futures fell on Monday after last week’s gains, weighed down by softening steel prices due to sluggish demand and increasing supply.

The most-traded September iron ore on the Dalian Commodity Exchange (DCE) ended daytime trading 0.12% lower at 809.5 yuan ($113.08) a metric ton, following a rise of about 2% the week before.

The benchmark July iron ore contract on the Singapore Exchange edged down 0.05% to $113.45 a metric ton, as of 0701 GMT, after rising by more than 4% in the previous week.

“The elasticity of iron ore futures prices is relatively large, given the low inventories, resilient demand and the comparatively wide difference between spot and futures prices,” analysts at Sinosteel Futures said in a note.

“But it will also follow the trend in the steel market.”

Analysts at investment bank J.P. Morgan forecast continued downside risks for iron ore prices, noting that additional support for the property sector would be localised and targeted.

Measures would be aimed at boosting completions and sales, which impact the cash flows of developers, rather than stimulating new construction activity directly, they said.

The iron ore futures market recouped some of its earlier losses following news that Rio Tinto RIO.AX was working to recover about 30 wagons of a self-driving iron ore train that derailed in Western Australia, an accident that analysts said had the potential to disrupt its exports.

Some, however, played down its impact on the iron ore market.

Coking coal and coke, the other steel-making ingredients, fell 1.55% and 0.81%, respectively.

Rebar on the Shanghai Futures Exchange shed 0.74%, hot-rolled coil fell 0.75%, wire rod lost 0.61% and stainless steel sank 2.1%.

“Some electric-arc-furnace-based steel mills resumed production on improved margins, adding downward pressure on the market,” said Cheng Peng, a Beijing-based analyst at Sinosteel.

“The destocking of steel products has slowed down.”

Source: Reuters


Please enter your comment!
Please enter your name here