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Iron ore prices fall as steel margins shrink and spot liquidity thins

Iron ore prices fall as steel margins shrink and spot liquidity thins
Iron ore prices fall as steel margins shrink and spot liquidity thins

Iron ore futures fell on Tuesday as'shrinking margins for steelmakers in China, the top consumer, were squeezed by high prices and dampened purchasing appetite.

The May contract for iron ore on China's Dalian Commodity Exchange ended the day trading 0.24% lower, at 819.5 Yuan ($117.47).

As of 0717 GMT, the benchmark for February iron ore traded on the Singapore Exchange dropped?0.81%. Over the past five months, the benchmark has been?above an important psychological level of $100.

Steelmakers resisted buying cargos at high prices, reducing the amount of liquidity on?the spot markets.

Mysteel data showed that the total volume of seaborne iron ore traded on Monday fell by 52% from the previous trading day.

a similar time, the portside stockpile that was swelling pushed up the price of the main steelmaking ingredient.

Analysts at Nanhua Futures warned that the steel margins had shrunk and iron ore prices were higher than what was reasonable based on fundamentals. Both of these factors pose downside risks.

Analysts predicted that after the price correction, the buying spree would likely resume.

Coking coal and coke, which are used to make steel, also fell, by 2.5% and 1.08% respectively.

The benchmarks for steel on the Shanghai Futures Exchange have been largely weaker. Hot-rolled coils fell 0.09%. Stainless steel was down 0.54%, and wire rods were down 0.4%. Rebar was unchanged. ($1 = 6.9762 Yuan) (Reporting and editing by Amy Lv and Ruth Chai; Sumana Nady and Subhranshu Saghu)

(source: Reuters)