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Iron ore prices fall as investors focus on coking coal

Iron ore futures fell on Wednesday as investors shifted their focus from iron ore to coking coal due to concerns about the demand for iron ore in China, its largest consumer.

As of 0712 GMT, the benchmark September iron ore traded on Singapore Exchange fell 0.7% to $100.75 per metric ton.

The daytime trading price of the most traded September iron ore contract at China's Dalian Commodity Exchange was 794.5 Yuan ($110.52) per ton, down by 0.06%.

Cao Ying is a Beijing analyst with broker SDIC Futures. She said that the buying in the spot market has been weak because mills are hesitant to stockpile raw materials in anticipation of the upcoming major event in September. This is dragging down futures prices.

The big event is a ceremony in Beijing on September 3, commemorating the 80th Anniversary of the End of World War Two.

Chinese steelmakers, particularly those in the north, often restrict production in advance of major events in order to maintain air quality in Beijing.

Cao, from SDIC, added that "Speculative sentiment" is very low as capital has poured into the volatile coal market.

Iron ore open interest in Dalian dropped by 4.2% on Tuesday compared to the previous day, while Dalian coking coal saw a 13.7% increase.

Open interest is the number of option contracts that have not yet been settled between buyers or sellers. It's a measure for investors' participation on a particular market.

Three analysts and traders have said that they are now focusing on trading coking coal.

Analysts said that the price of coking coal increased by 6.45%. This was due to fears about a possible contraction in supply, amid more stringent safety inspections for coal mines, and government investigations for reducing excess production.

The price fluctuations of coking coal have attracted more capital and investors, which has in turn increased the volatility, said Zhou Tao analyst at Galaxy Futures.

Coke rose by 1.95%.

The Shanghai Futures Exchange has seen a rise in most steel benchmarks. Rebar gained 0.75%; hot-rolled coil grew 0.41%; wire rod climbed 0.38%, while stainless steel fell 0.12%. ($1 = 7,1889 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)

(source: Reuters)