Benchmark Dalian iron ore futures slipped in early trade as rising inventories at China’s ports kept physical prices under pressure, though losses were capped by restocking demand from some steel mills.
Dalian Commodity Exchange’s most-traded iron ore, for delivery in January 2020, dropped 0.9 percent to 619.50 yuan ($88.54) a ton.
Benchmark spot 62 percent iron ore cargoes for delivery to China was steady at $83.50 a ton on Wednesday, the weakest since Jan. 29 this year, based on data compiled by SteelHome consultancy.
Spot prices of the steelmaking raw material are closing in on levels seen before the Jan. 25 collapse of a mine tailings dam in Brazil owned by Vale, which sparked a five-month rally in prices that peaked in July at a five-year high.
Imported iron ore inventory at Chinese ports is hovering around a six-month high, estimated at 131.65 million tons, as of last Friday, based on SteelHome data.
Market participants shrugged off news saying that a Brazilian federal court could annul Vale’s acquisition of midsize iron ore miner Ferrous Resources until certain environmental compliance documents have been provided.
Vale said in August that it had to temporarily halt operations at the Viga concentration plant of its newly acquired Ferrous Resources do Brazil unit due to “inconsistency in the documents.”
Notwithstanding the pressure from stabilizing supply from top exporters Brazil and Australia, iron ore prices should find support as steel margins have improved, said analysts at ANZ Research in a note.
“Steel mills have been reluctant to restock raw materials as margins fell amid a gloomy outlook for steel demand,” they said. “However, margins have started rising again, raising the specter of some pent up demand coming through the iron ore market.” – Reuters