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Iron ore to suffer second weekly loss due to higher supply and concerns about demand

The iron ore price started the week on a shaky footing, poised for a second consecutive weekly decline due to?prospects for rising supply and a seasonally weakening of demand. However, resilient near-term consumption by top buyer China, curbed large losses.

By?0304?GMT the most traded iron ore contract at China's Dalian Commodity Exchange slipped 0.06% to 792.5 Yuan ($116.53), and was 2.4% lower so far this week.

On the Singapore Exchange however, the benchmark June iron ore was 0.15% higher, at $105.95 per ton. This represents a 2.9% decline so far this week. The contract reached its lowest level since April 28, at $105.45, earlier in the session. The sudden increase in the latest weekly shipments of major suppliers Australia, Brazil and other countries suggests that more arrivals will be at major Chinese ports over the next few weeks. Steel demand in China will be seasonal weakening when higher temperatures curb outdoor construction activities in the summer.

Analysts said that rising supply and weaker demand will cause port inventories to rise and iron ore prices to fall, even though the current consumption of this key ingredient in steelmaking is limiting losses.

Data from Mysteel, a consultancy, showed that the average daily hot metal production, which is a measure of iron ore consumption, increased by 0.6% compared to the previous week, reaching a record high of 2.41 million tonnes on May 21.

The price of coke and coal, which are used to make steel, fell by 3.02%?and?1.95%?respectively.

Galaxy Futures analysts said that after several rounds of restocking, the coking coal stock at some plants has recovered to a respectable level.

They added that "some?buyers" were hesitant to accept higher coal prices and only replenished on a hand-to mouth basis. This put downward pressure 'on the coking coal price.

Steel benchmarks at the Shanghai Future Exchange have lost ground. Hot-rolled coils fell 0.91% and wire rod 0.27%, while stainless steel dropped 0.4%. ($1 = 6.8007 Chinese Yuan) (Reporting and editing by Shri Navaratnam, Lewis Jackson)

(source: Reuters)