SHANGHAI, May 10 (SMM) - Iron ore futures dropped by another 7% in morning trading by hitting a low of 755.5 yuan/mt after falling for two straight days. The contract regained some of the losses and recorded a loss of 5.29% as of close at noon at 769.5 yuan/mt.

In the spot market, the spot prices at port fell 10-20 yuan/mt from last week in the morning. The traders were not active in shipment, while steel mills restocked on rigid demand. The market was quiet on the whole.

Prices of PB fines in Shandong were mostly between 920-925 yuan/mt, down 20-25 yuan/mt from last week. The traded prices of SSF in Shandong stood at 710 yuan/mt, down 20 yuan/mt on a weekly basis. The traded prices of PB fines and SSF in Tangshan were 920 yuan/mt yuan 715 yuan/mt respectively, down 20 yuan/mt and 15 yuan/mt from a week ago.

The recent decline in iron ore prices are the result of triple factors. First, commodity prices are pressured by US Fed’s rate hike, which pulled down iron ore prices. Also, domestic market has been pessimistic as the current round of COVID is still affecting the market. Lastly, raw material prices are suppressed by operation losses across steel mills.

In the short term, the production of steel mills in Shandong, Shanxi, Hebei and Jiangsu has been relatively stable despite operation losses, according to SMM. The mills have strong restocking demand amid low in-plant inventory due to the pandemic, offering some support to ore prices. On the other hand, spot sources of iron ore are higher in cost, hence the traders are firm to the prices. However, considering rising shipment from overseas mines, arrivals at ports in China are expected to rise, constraining ore prices. As such, iron ore prices are likely to move in a wide range recently.