Dalian iron ore futures slipped as depressed steel mill margins in China outweighed hopes of a seasonal rise in demand.
Purchases of the steelmaking ingredient in China, the world’s top steel producer, usually increase after the rainy season.
Iron ore’s most-active September contract on China’s Dalian Commodity Exchange was down 0.4 percent at 844.50 yuan ($120.48) a ton by the midday break, after rising for two sessions.
The most-active August contract on the Singapore Exchange moved between positive and negative territories, and was up 0.3 percent at $107.62 a ton by late morning trade.
“While steel mill margins, especially rebar margins, show some early signs of stabilization, they remain depressed and we believe this has to pick-up further in order to have any meaningful uptick in production rates,” said Hui Heng Tan, an analyst at commodity broker Marex Spectron, Singapore.
Chinese steel mills are facing squeezed margins due to rising cost of raw materials, with iron ore’s benchmark spot prices scaling the highest in nearly a year on Wednesday, at $113.50 a ton based on data from SteelHome consultancy.
“Our latest assessment of existing steel rates continues to show further slowdown,” Tan also said in a note.
Chinese steel futures also see-sawed between gains and losses, with construction steel rebar on the Shanghai Futures Exchange up 0.2 percent by the midday break.
“At present, there are still heavy rainfall in the south, and the flood disaster is still severe,” analysts at Sinosteel Futures Co Ltd in Beijing wrote in a note. — Reuters
