Dalian iron ore prices extend declines on cutbacks at steel mills

SHANGHAI, Aug 12 (SMM) – Iron ore prices on the Dalian Commodity Exchange (DCE) extended their declines from last week as of Monday August 12 amid concerns about weaker demand as steelmakers began output cuts on the verge of loss. 

The most-traded DCE iron ore contract, for January 2020 delivery, lost as much as 5.6% during the morning trading hours on Monday August 12, hitting fresh two-month lows of 609.5 yuan/mt. 

SMM learned that steelmakers across central China’s Shaanxi, Shanxi, Gansu and Sichuan provinces agreed at the meeting over the weekend to curtail production to prop up steel prices, and this intensified worries about slower demand. 

Last week, negative macroeconomic developments severely depressed the iron ore spot and futures markets.

Prices of many DCE iron ore contracts fell to their daily limits at the start of last week as market talk suggested that the DCE would relax rules for deliveries of domestic concentrates. 

The US-China trade war escalated further as China responded that it would stop purchases of US agriculture products after the US decided to impose tariffs of 10% on $300 billion worth of Chinese goods from September 1. 

The price slump in the futures market triggered panic in the spot market and prompted some traders to sell off cargoes at lower prices last week. Bearish sentiment deterred steel mills from purchasing, which aggravated selloffs. Price declines slowed in the second half of last week as steel mills restocked on sharply lower prices and as traders sought bargains. 

As of Friday August 9, traded prices of spot PB fine at Qingdao port slid 100-150 yuan/mt from a week ago and stood at 745-755 yuan/mt, with SMM’s price index MMi for spot iron ore with 62% Fe losing 122 yuan/mt on the week to 772 yuan/mt. 

SMM data showed that stocks across 35 Chinese ports shrank 1.29 million mt from a week ago and 31.45 million mt from a year ago, to stand at 107.84 million mt as of Friday August 9, amid restocking by steel mills in the second half of the week.