Iron ore marks first weekly fall in three as steel rally stalls

20 January 2018

Iron ore futures in China rose on Friday, but posted their first weekly drop in three as slower demand stalled a rally in steel prices after they surged nearly 50 percent last year.

Spot iron ore prices were also on course for their first weekly fall in three weeks, with the benchmark rate hitting a 2-1/2-week low under $75 a tonne.

“It is really the slowest season for steel production and steel demand overall,” said Helen Lau, analyst, Argonaut Securities in Hong Kong.

Winter in China usually slows activity in the construction sector, one of the biggest consumers of steel. China has also imposed restrictions on steel production in 28 cities from November through March in its campaign against smog.

The most-active iron ore contract for May delivery on the Dalian Commodity Exchange closed up 1.6 percent at 543.50 yuan ($85) a tonne. However, the contract, which touched a 2-1/2-week low on Wednesday, dropped almost 2 percent for the week.

Weaker futures have also dragged down spot prices. Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB also hit a 2-1/2-week trough of $74.51 per tonne on Wednesday, recovering only slightly to $74.87 on Thursday, data from Metal Bulletin showed.

The spot benchmark slipped 4 percent this week.

Underlining leaner demand, inventories of construction steel product rebar among Chinese traders have risen to 3.62 million tonnes, as of Jan. 12, from a record low of 2.84 million tonnes in mid-December, according to data from SteelHome consultancy.

The most-traded rebar on the Shanghai Futures Exchange ended 2.2 percent higher at 3,926 yuan per tonne.

Rebar, which surged 46 percent last year, was still down more than 4 percent since touching a three-month high of 4,104 yuan on Dec. 4.