Latest News

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

Iron ore futures fell to their lowest level in a week, Monday. This was due to shrinking steel margins as well as expectations for lower steel production in advance of a Chinese military parade.

The January contract for iron ore on China's Dalian Commodity Exchange closed daytime trading 2.67% lower, at 766 Yuan ($107.09), per metric ton. It had hit its lowest level since August 20, at 761 Yuan, earlier in the day.

At 0700 GMT the benchmark October Iron Ore traded on the Singapore Exchange had fallen 2.05% to $101,35 per ton. This is the lowest since August 25.

Broker Hongyuan Futures stated that the pressure on ore price has been caused by a combination of tighter steel margins and lower hot metal production expectations.

Analysts expect the hot metal production, which is a measure of iron ore consumption, to drop sharply, as steelmakers from Tangshan, and other northern areas, reduce their production in order to reduce air pollution before a parade to mark the end of World War II on September 3.

Steel margins have been squeezed and raw material appetite has decreased due to the persistent concerns in China's property sector.

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

A Singapore-based trader stated that "it's the start of a bad week with steel inventories piling and weak manufacturing data."

Coking coal, coke and other steelmaking materials have fallen to their lowest levels in four weeks. They are down by 3.29% and 3.54 %, respectively.

The Shanghai Futures Exchange saw a decline in most steel benchmarks. Rebar fell 1.89%, while hot-rolled coils dropped 1.58% and wire rods fell 1.54%. Stainless steel, however, rose 1.13%. $1 = 7.1529 Chinese Yuan (Reporting and editing by Amy Lv, Lewis Jackson and Sonia Cheema).

(source: Reuters)