SHANGHAI: Chinese iron ore futures inched up on Wednesday after a five-day losing run, but the gains are likely to be limited due to weak spot prices and cutbacks in output at steel mills.
Chinese steel mills have curbed production by bringing forward maintenance after making losses of as much as 200 yuan($32) a tonne, a move that has helped drag spot iron ore prices down to their lowest in 5-1/2 years.
Iron ore futures for May delivery on the Dalian Commodity Exchange edged up 0.2 percent to 471 yuan a tonne by the midday break. The price has fallen 7 percent so far this year.
"Sentiment is too weak right now, with mills cutting output. We don't really expect any good news coming for iron ore before the Lunar New Year holiday," said an iron ore trader in Beijing.
"The downside room for iron ore could be limited, but the long-term view is still bearish due to rising low-cost supplies."
Benchmark 62 percent grade iron ore for immediate delivery to China <.IO62-CNI=SI> fell 0.8 percent on Tuesday to $62.80 a tonne, its lowest since May 2009, according to data compiled by the Steel Index.
Slowing construction activities and sluggish steel demand in the world's biggest producer have hammered prices.
"Some mills that haven't conducted maintenance have also slowed their production rates, denting demand for iron ore," said Shang Jinyu, a Zhengzhou-based analyst at Central China Futures.
The most traded May rebar contract on the Shanghai Futures Exchange was up 0.4 percent at 2,467 yuan a tonne. It has fallen 5 percent so far this year.
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