Iron ore futures prices drifted lower on Tuesday as wider losses induced production cuts among steelmakers in top consumer China and lingering high portside inventories weighed on sentiment.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) DCIOcv1 bucked the recent uptrend to slide 1.42% to 763 yuan ($106.78) a metric ton after climbing nearly 2% on Monday.
The benchmark September iron ore SZZFU4 on the Singapore Exchange was 0.83%lower at $102.95 aton as of 0700 GMT.
Prices of the key steelmaking ingredient were hit by receding near-term buying appetite after more Chinese steelmakers recorded losses, said analysts.
“We expect hot metal output to see more significant drops this week as more mills suffered losses … and the iron ore market has not yet entered the cycle of destocking,” analysts at Galaxy Futures said in a note.
Average daily hot metal output among steelmakers surveyed fell by 1.2% in the week to Aug. 2 to around 2.36 million tons,the lowest since early June, while profitability slipped to 6.5% from 15% in the prior week, data from consultancy Mysteel showed.
“It’s a normal downward correction after a rapid price rally when fundamentals are not supportive,” said Cheng Peng, a Beijing-based analyst at Sinosteel Futures.
Other steelmaking ingredients on the DCE also lost ground, with coking coal DJMcv1 and coke DCJcv1 down 1.06% and 0.99%,respectively.
Most steel benchmarks on the Shanghai Futures Exchange retreated. Rebar SRBcv1 dipped 1.78%, hot-rolled coil SHHCcv1 lost 0.97%, stainless steel SHSScv1 shed 1.35% while wire rod SWRcv1 added 1.5%.
Investors and traders are awaiting directions from a batch of key trading data due on Wednesday.
Source: Reuters