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China Steel Production Rises Despite Weak Demand, Iron Ore Set to Lose Weekly

China Steel Production Rises Despite Weak Demand, Iron Ore Set to Lose Weekly

The price of iron ore futures eased on Friday and was set to fall by a significant amount on a weekly basis as the rising steel production and sluggish steel demand in China put pressure on steel costs and iron ore inputs.

As of 0257 GMT, the most-traded contract for January iron ore on China's Dalian Commodity Exchange was trading 0.71% lower. It was 770 yuan (US$107.21) per metric ton.

This week, the contract has fallen by 0.84%.

The benchmark September ore price on the Singapore Exchange is down 0.32% at $100.85 per ton and has fallen 1.03% this week.

Atilla Winnel, Navigate Commodities' managing director in Singapore, stated that the latest weekly data onshore released on Thursday showed that certain steel mills had begun to increase production of certain products. This is consistent with trends we observed over two weeks using daily satellite thermal imagery and readings.

Atilla said that the higher steel production in an environment of weak demand is putting downward pressure on steel costs and margins, including iron ore.

According to Mysteel, the total stockpiles of iron ore across Chinese ports increased by 0.2% in a week to 138.5 millions tons on August 21. This added further pressure to the prices.

China also requested consultations with the World Trade Organisation regarding Canada's steel and aluminum quotas and surtaxes.

The announcement follows that of Canadian Prime Minister Mark Carney, who announced last month a 25% duty on imports of steel from any country which contains steel melted and cast in China prior to the end of July. This was part of an effort to protect Canada's domestic industry.

Coking coal and coke, which are used to make steel, also fell on the DCE, by 1.72% each and 0.8% respectively.

All steel benchmarks at the Shanghai Futures Exchange have lost ground. The price of rebar fell by 0.32%. Hot-rolled coil dropped 1%. Wire rod was down 0.21%. Stainless steel was down 0.62%. ($1 = 7,1821 Chinese yuan). (Reporting and editing by Rashmi Liew)

(source: Reuters)