Arrivals fall for a third week but port stocks build, capping any recovery [SMM Daily Iron Ore Brief]

The DCE most-traded I2701 contract settled at 671.5 yuan/mt today, down 0.37% from the previous session and a fourth straight losing session this week, taking the decline since the last pre-holiday session on 30 September to 31 yuan/mt. Qingdao port spot prices fell 3-4 yuan/mt on average. Traders were moderately active in offering and mills bought to cover immediate needs, leaving trading thin.

Demand is at a near-term low. Average daily hot metal output across 242 mills fell to 2.3520 million mt, down 36,200 mt from before the holiday, while output lost to maintenance reached 1.9011 million mt this week, a third consecutive weekly increase. Two rounds of coke price cuts have, however, lifted spot margins on long-process rebar from -179.79 yuan/mt before the holiday to -68.12 yuan/mt. Hot metal output should recover slightly as maintenance ends, though mills remain reluctant to lift production.

On supply, the first post-holiday port data showed a stock build. SMM 10-port inventories stood at 105.14 million mt on 15 October, up 2.12 million mt from before the holiday, led by fines and lump. Arrivals in China have now fallen for three straight weeks, easing pressure ahead, but the existing overhang will take time to clear. Hot metal output may be bottoming, yet high inventories cap the upside, leaving iron ore prices in a narrow, softer range.[SMM Steel]