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Iron ore prices fall on tepid market demand despite high margins

Iron ore futures fell on Friday due to the tepid demand from steel producers. However, high port margins and a tight physical market supported prices.

As of 0325 GMT, the most-traded contract for?May?iron ore on China's Dalian Commodity Exchange was trading 0.27% lower. It was 746.5 Yuan ($108.89), per metric ton.

The contract has fallen by 0.99% in the last week and by 5.86% this month.

The benchmark iron ore for April on the Singapore Exchange fell 0.22% to $98.15 per ton.

The contract has gained 3.59% so far this week, but is on track to a loss of 4.81% for the month.

Market participants are expecting a tepid demand for feedstocks due to the imminent production cuts of Steel from March 4, 2019.

A note published by the Shanghai Metals Market on Thursday stated that overall supply is still relatively loose. Port inventories are still high with little destocking.

The World Steel Association reported on Thursday that the crude steel production in China, which is the world's largest producer and consumer, fell 13.9% to 75,3 million metric tonnes in January.

Steel production has not recovered from the Lunar New Year, as seen by increased hot metal production. This is a good indication that prices are still low.

The port margins on seaborne iron ore have reached a record high. A trader said that traders are able to resell the imported cargo for a high profit, which is a sign of a tight physical market onshore.

The trader said that the wider spread between the portside spot price and the seaborne benchmark prices?understood the tightness. As spot prices rose faster than the offshore markets, this triggered restocking.

Coking coal and coke, which are used to make steel, also lost ground.

The benchmarks for steel on the Shanghai Futures Exchange have been moving lower. Rebar fell by 0.39%, while hot-rolled coils dropped 0.62%. Wire rod also declined 1.09%. Stainless steel was down 0.42%. ($1 = 6.8553 Yuan) (Reporting and editing by Ronojojo Mazumdar).

(source: Reuters)