Iron ore slides as rising stocks and weak steel margins blur demand outlook
Published by Oliver Kleinschmidt,
Editorial Assistant
Dry Bulk,
Iron ore futures prices slipped, as traders took a cautious stance after rising stocks and weak steel margins counteracted with hopes that demand would pick up in China following a week-long Lunar New Year holiday break.
The most-traded May iron ore contract on China's Dalian Commodity Exchange (DCE) reversed course from earlier in the session to close trade 0.52% lower at ¥951.5 (US$132.20) /t.
The benchmark March iron ore SZZFH4 on the Singapore Exchange slid 2.91% to US$127.45 /t in part due to fading bets of early US rate cuts amid stronger-than-expected US producer prices in January.
The weakness in the Singapore benchmark came after it had climbed by over 3% over the holiday break when Chinese bourses were closed.
"Such a steep price fall is out of my expectation as we thought prices would consolidate today; the sharp drops in the coal market might have given a blow to market confidence, dragging down ore prices as well," said Cheng Peng at Sinosteel Futures.
Iron ore inventory at major Chinese ports surveyed rose 4% during the holiday break to 136.76 million t as of 18 February, while profitability among mills surveyed slid to 25.54%, the lowest since mid-November, data from consultancy Mysteel showed.
Dalian ore prices rose earlier in the day, boosted by the prospect of further stimulus to be rolled out after China's Premier Li Qiang urged departments under the cabinet to do more work to boost public confidence and expectations, state media reported.
Other steelmaking ingredients on the DCE also posted losses as sentiment was soured after some steel mills in north China's Hebei and east China's Shandong Province lowered their procurement prices for coke by between ¥100 and ¥110 /t.
Coking coal DJMcv1 and coke DCJcv1 tumbled 4.6% and 3.2%, respectively.
Steel benchmarks on the Shanghai Futures Exchange were mixed. Rebar SRBcv1 fell 1.07%, hot-rolled coil SHHCcv1 shed 0.88%, while wire rod SWRcv1 added 0.52% and stainless steel SHSScv1 advanced 0.55%. (US$1 = ¥7.1974 Chinese yuan renminbi)
Source: Reuters (Reporting by Amy Lv and Andrew Hayley; Editing by Sherry Jacob-Phillips and Savio D'Souza)
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