Chinese iron ore futures fell 1 percent on Friday morning, with weak underlying steel demand further eroding the recent price rally.
The most-active September iron ore futures contract on the Dalian Commodity Exchange closed the morning at 435.5 yuan ($70.14) per tonne. It hit a one-week high of 445.5 yuan on Wednesday amid concerns about supply.
Port iron ore inventories monitored by the SteelHome consultancy have fallen by almost a fifth since late March following a decline in import volumes. The decline has helped drive up spot iron ore prices by nearly 30 percent.
But with underlying steel demand still weak and China facing a seasonal downturn in steel consumption, that rally appears to have come to an end.
"Steel mills are still producing far more than is needed and the glut will continue for the next few months," said Sun Qiaoling, a steel analyst with Shenzhen Tangyin Investments.
Spot iron ore prices slipped 0.65 percent to $61.30 per tonne on Thursday, with ANZ Bank saying in a note that new supply fears were emerging following a decision by India's cabinet to renew long-term supply deals with Japan and South Korea, ending a long export ban.
China's industry ministry is about to announce plans to shed another 80 million tonnes of ageing steel capacity over the 2015-2017 period, but such a move is unlikely to have any short term impact and big mills will be under pressure to slash output over the summer months.
There are also concerns that Chinese steel exports - a lifeline for the sector over the past year - might come under further pressure, industry consultancy Mysteel said in a note, with India raising import tariffs by 2.5percentage points and tightening quality inspections.
The most-traded steel rebar futures contract on the Shanghai Futures Exchange slipped 0.4 percent on Friday morning.
Source: Reuters |
