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Iron ore prices fall on the back of weak steel demand and rising China port stocks

Iron ore prices fell on Monday due to a sluggish demand for steel and a buildup of inventories in Chinese ports.

The January contract for iron ore on China's Dalian Commodity Exchange ended the daytime trading 1.57% lower, at 784 Yuan ($1010.11) per metric ton.

As of 0705 GMT, the benchmark September iron ore traded on Singapore Exchange was down by 0.02% to $105.3 per ton.

Analysts from ANZ noted that iron ore futures dropped sharply during the week of October 1-8 due to a slowdown in steel mill restocking.

Hexun Futures, a Chinese broker, said that a combination of high steel supplies and weak demand was impacting the market.

SteelHome data show that total iron ore stocks at Chinese ports increased by 0.29% in a week to 132.5 million tonnes.

Everbright Futures said that the current high levels of molten-iron production combined with strong arrivals at ports suggest that port inventories will likely rise further.

Brokers said that if steel demand declines, the narrowing margins of steel companies may lead to voluntary production cuts. This could result in a buildup of iron ore stocks.

According to Mysteel, blast furnace operation at integrated steel mills has remained robust in recent years.

Mysteel's data shows that the average furnace capacity utilization rate increased for the third consecutive week in the week of September 19-25, a rise of 0.51 percent points from the week before.

Coking coal and coke, which are used to make steel, also fell, by 4.98% and 4.16 percent, respectively.

All steel benchmarks at the Shanghai Futures Exchange have lost ground. Rebar dropped 1.34%, while hot-rolled coil fell 1.23%. Wire rod also declined 1.21%, and stainless steel was down 0.7%. ($1 = 7.1201 Chinese yuan) (Reporting by Lucas Liew; Editing by Subhranshu Sahu)

(source: Reuters)