Iron ore slips as Chinese steelmakers face margin pressure

0
181

Benchmark iron ore futures in Asia fell on Wednesday, with the key Dalian contract extending losses to a second session, as reduced profitability at Chinese steel mills following a recent rally in prices of steelmaking ingredients weighed on sentiment.

The most-traded iron ore for September delivery on China’s Dalian Commodity Exchange ended daytime trading 0.5% lower at 926.50 yuan ($138.85) a tonne.

On the Singapore Exchange, the most-active July iron ore contract was down 0.2% at $144.30 a tonne, as of 0702 GMT.

A rally that began in late May had propelled Dalian iron ore to a 10-month high on Monday, while the SGX contract hit its highest in nearly five weeks on Tuesday, underpinned by renewed optimism around demand in top steel producer China.

Worries about shrinking stocks of imported iron ore at Chinese ports had added fuel to that rally.

But costlier iron ore and other steelmaking inputs mean reduced profits for steelmakers that have yet to see a meaningful steel demand recovery even as China has eased COVID-19 restrictions.

“The short-term drive is upward but the valuation is on the high side, and the risk of volatility will increase in June-July,” Zhongzhou Futures analysts said in a note.
Iron ore’s spot price for the benchmark 62%-grade material in China was assessed at $147 a tonne on Tuesday by SteelHome consultancy, the highest since April 22.

“Iron ore fluctuates at a high level,” Zhongzhou analysts said, blaming low profits that have prompted mills to be cautious on purchases.

Construction steel rebar on the Shanghai Futures Exchange SRBcv1 rose 1%, while hot-rolled coil advanced 0.6%. Stainless steel climbed 1.6%.

Dalian coking coal resumed its rally, gaining 2.6%, as a COVID-19 outbreak in Inner Mongolia, one of China’s major coal-producing regions, sparked concerns over supply of the steelmaking raw material. Coke jumped 1.8%.

Source: Reuters