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Iron ore, steel prices dip on fragile China demand recovery

Chinese ferrous futures fell on Monday, as mounting steel stocks and rising portside iron ore inventory indicated a slow recovery in demand, even as latest indicators pointed to a rebounding economy.

The most-traded May iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 2.2% lower at 841.50 yuan ($123.23) a tonne.

On the Singapore Exchange, the steelmaking ingredient’s benchmark March contract SZZFH3 was down 3.5% at $120.35 a tonne, as of 0702 GMT.

On the Shanghai Futures Exchange, rebar SRBcv1 shed 1.6%, while other steel benchmarks also dropped. Hot-rolled coil SHHCcv1 dipped 1.4%, wire rod SWRcv1 lost 1.7%, and stainless steel SHSScv1 slipped 0.5%.

“Industrial metals markets will need to wait for February and March economic data to get a true sense on the health of the Chinese economy,” Navigate Commodities Managing Director Atilla Widnell said.

Traders were cautious despite data showing new bank loans in China jumped more than expected to a record 4.9 trillion yuan ($717.21 billion) in January, while new home sales in 16 Chinese cities rose for the second straight week.

“The profits of steel mills have not improved,” Huatai Futures analysts said in a note. “The continuous increase in inventory will cause short-term adjustments in finished product prices.”

Steel inventories held by Chinese traders, which have been steadily rising since late December, increased by 1.5 million tonnes over Feb. 3-9, according to Mysteel consultancy’s latest stocks survey.

Meanwhile, portside iron ore inventory climbed last week to 138.5 million tonnes, the highest since mid-September, SteelHome consultancy data showed.

Other Dalian steelmaking inputs were also weaker, with coking coal DJMcv1 down 2.9%, while coke DCJcv1 dropped 2.7%.

“Higher-frequency construction steel trading volumes alluded to emerging shoots of a fragile recovery in steel demand last week,” Widnell said.

“If this trend extends for a second consecutive week, this could also reignite the optimism around the reopening narrative.”

Source: Reuters

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