Iron ore struggles for direction as China data counters soft demand outlook

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Prices of iron ore futures struggled for direction on Wednesday as support from improved economic data in top consumer China partially offset lingering pressure from tepid near-term demand, high portside stockpiles and a stronger U.S. dollar.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trade 0.92% lower at 810.5 yuan ($111.74) a metric ton. The contract dropped more than 4% on Tuesday.

The benchmark July iron ore SZZFN4 on the Singapore Exchange traded 0.43% higher at $104.65 a ton, as of 0708 GMT.

China’s consumer inflation held steady in May, while the decline in producer prices eased, according to official data on Wednesday.

Producer prices, which were stuck in deflation since September 2022, fell at a slower 1.4% pace in May after contracting 2.5% in April, and compared with a forecast 1.5% decline.

Analysts at Soochow Futures forecast prices to continue the downtrend this week, citing subdued demand, relatively steady shipments and a further pick-up in portside inventory.

The market has reached certain consensus that hot metal output has peaked as the weakening steel demand curbed mills’ interest in ramping up production,” analysts at Shengda Futures said in a note, forecasting shipments in June to reach the highest level this year amid miners’ push to achieve quarterly targets.

It is mainly the sagging domestic demand and a firmer dollar =USD that recently weighed on prices of bulk commodities, analysts at Galaxy Futures said in a note.

Other steelmaking ingredients on the DCE gained, with coking coal DJMcv1 and coke DCJcv1 up 1.21% and 0.97%, respectively.

Most steel benchmarks on the Shanghai Futures Exchange were mixed. Rebar SRBcv1 dipped 0.11%, wire rod SWRcv1 lost 0.18% while hot-rolled coil SHHCcv1 and stainless steel SHSScv1 were almost flat.

In the short term, we expect steel prices to feel further downside pressure amid lower raw material prices and slower destocking due to seasonally faltering steel consumption,” analysts at Huatai Futures said in a note.

Source: Reuters