SINGAPORE, Oct 22: Chinese iron ore futures fell for a second day running on Tuesday amid worries a slower steel market would hurt demand for the raw material at a time when global miners are boosting output.
Steel production by China, the world’s biggest producer and consumer, slipped in early October amid weaker steel prices as the country soon heads into winter, usually a lean consumption period when construction activity thins out.
Crude steel output by China, the world’s biggest producer and consumer, dropped to an average 2.128 million tonnes in the first 10 days of October from 2.152 million tonnes in the last 10 days of September, industry data showed last week.
The most active 62-percent grade iron ore contract for May delivery on the Dalian Commodity Exchange was down 1.2 percent at 955 yuan a tonne by the midday break.
‘When I speak to steel mills, they tell me they are very well supplied under their long-term contracts, so there’s no appetite right now to replenish,’ said an iron ore trader in Hong Kong.
‘There could be further room for price weakness.’
The Dalian futures launched to brisk volumes on Friday, with traders saying it provides an alternative reference price for Chinese mills, the world’s biggest buyers of iron ore.
Stripping out China’s 17 percent value-added tax, port charges and other fees, the current Dalian price comes to about $128 a tonne, traders said.
That compares to the price of seaborne iron ore of $134.40 a tonne, for delivery to China’s Tianjin port, on Monday, according to data compiled by Steel Index.
BHP Billiton , the world’s No. 3 iron ore producer, increased its projected output for fiscal 2014 to 212 million tonnes from a previous target of 207 million tonnes, opting to focus spending on businesses it deems most profitable.
BHP on Monday forfeited nine oil and gas exploration blocks in India, citing an inability to carry out exploration operations there.
The most-traded rebar contract for May delivery on the Shanghai Futures Exchange was little changed at 3,645 yuan a tonne.
‘The steel market is getting slower and we would expect this to continue through winter,’ said a trader in Shanghai.
Stockpiles of construction steel product rebar held by Chinese traders had been steady at 5.8 million tonnes over the past three weeks, according to data compiled by Bank of America Merrill Lynch. ($1 = 6.0925 Chinese yuan) (AGENCIES)
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