BEIJING: Dalian and Singapore iron ore futures fell on Monday after gains last week, undermined by softening steel prices due to sluggish demand and increasing supply. The most-traded September iron ore on the Dalian Commodity Exchange (DCE) traded 0.37% lower at 807.5 yuan ($112.98) a metric ton, as of 0313 GMT, following a rise of about 2% the week before.
The benchmark July iron ore contract on the Singapore Exchange was 0.93% lower at $112.45 a metric ton as of 0303 GMT, after rising by over 4% the previous week. “The elasticity of iron ore futures prices is relatively large given the low inventories, resilient demand and the comparatively wide difference between spot and futures prices,” analysts at Sinosteel Futures said in a note.
“But it will also follow the trend in the steel market.” Analysts at investment bank JP Morgan forecast continued downside risk for iron ore prices, noting that additional property support will be localised and targeted.
Policy-easing measures would be aimed at boosting completions and sales which impact developers’ cash flows, rather than directly stimulating new construction activity, they said.
The weakness came despite iron ore prices being underpinned earlier in the trading session by expectations of more effective stimulus measures to be announced soon to spur economic growth in top consumer China. Officials, in the latest cabinet meeting in Beijing, pledged to roll out policies in a timely manner when conditions are right and to take more forceful measures in response to changes in the economic situation, state media said on 16 June. Coking coal and coke, the other steel-making ingredients, similarly fell 0.54% and 0.44%, respectively.
Rebar on the Shanghai Futures Exchange shed 0.77%, hot-rolled coil fell 0.82%, wire rod lost 0.45% and stainless steel sank 2.1%. “Some electric-arc-furnace-based steel mills resumed production on improved margins, adding downward pressure to the market,” said Cheng Peng, a Beijing-based analyst at Sinosteel. “The destocking of steel products has slowed down.
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