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Iron ore reaches a one-week low due to thin steel margins and weak demand

Iron ore futures fell on Monday, to their lowest level in a week. This was due to thinner steel margins as well as the expectation of lower demand because of production restrictions ahead of an upcoming military parade in China.

The most traded January iron ore contract at China's Dalian Commodity Exchange fell by 3.11%, to 762.5 Yuan ($106.60), the lowest price since August 20.

The benchmark October iron ore traded on the Singapore Exchange fell 2.24% at $101.15 per ton by 0146 GMT. This is the lowest since August 25.

Broker Hongyuan Futures stated that the lower hot metal production and narrower steel margins put pressure on ore price.

Analysts expect hot metal production, which is a measure of iron ore consumption, to fall dramatically as a result of the production restrictions in northern China.

Steelmakers in Tangshan - China's largest steelmaking hub - have implemented production controls to ensure better air for a military display on September 3, commemorating the end of World War Two. This has reduced ore demand.

Steel margins have been squeezed by a subdued demand for steel, due to the protracted problems with property in the home. This has lowered appetite for raw materials.

An official survey released on Sunday showed that China's manufacturing activity declined for the fifth consecutive month in August. This suggests a slowdown in domestic demand.

Coke and coking coal, two other ingredients used in steelmaking, have fallen to their lowest levels in four weeks. They are down by 4.24% and 4.17 percent, respectively.

The majority of steel benchmarks traded on the Shanghai Futures Exchange have declined. Rebar fell by 2.11%; hot-rolled coils dropped 1.58%; wire rods declined 1.27%. Stainless steel, however, rose 0.51%. ($1 = 7.1529 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)

(source: Reuters)