Iron ore futures in China edged up on Monday as the market stabilised after recent steep falls in prices spurred buying interest in the world’s top consumer of the steelmaking commodity.
Spot iron ore prices rose last week after a seven-week slide that pulled down the raw material to its weakest since September 2012. A glut in supply could limit any further price recovery at a modest level, traders said.
Iron ore contract for delivery in September on the Dalian Commodity Exchange closed 0.3 percent higher at 690 yuan ($110) a tonne. The contract rose slightly last week after falling in the prior five weeks.
“Supply is still more than demand, but we have probably seen the peak in supply for now and that’s helping stabilise the market a bit,” said a Shanghai-based iron ore trader.
Despite a 13 percent drop in iron ore prices in May, China’s imports of the raw material fell to 77.4 million tonnes in May from 83.4 million tonnes in April which was the second highest monthly volume.
Imports may continue to decline on a month on month basis due to high inventory of iron ore at Chinese ports and among mills, a crackdown on iron ore financing in China and as mills run down stockpiles ahead of the slow summer season, said Helen Lau, a senior mining analyst at UOB-Kay Hian Securities in Hong Kong.
“This will put more downward pressure on the over supplied seaborne market. We stay bearish on iron ore and steel prices,” Lau said in a note on Monday.
Stocks of imported iron ore at 44 Chinese ports stood at 113.2 million tonnes as of June 6, down slightly from a record high of 113.6 million tonnes in the previous week, according to industry consultancy Steelhome.
Chinese steel mills are cutting back on long-term iron ore contracts in favour of cheaper spot cargoes on expectations that spot prices are unlikely to rebound strongly anytime soon.
Benchmark ore with 62 percent iron content for immediate delivery to China rose 0.2 percent to $94.50 a tonne on Friday, according to data compiler Steel Index.
Iron ore ended the week nearly 3 percent higher in its first weekly gain in eight weeks, but has stayed below $100 a tonne since May 19. It touched a 20-month low of $91.80 on May 30.
Chinese mills curbing steel production during the lean consumption season from June to August could pose a risk for iron ore prices going forward.
Crude steel output of the country’s large mills reached 1.767 million tonnes between May 21 and 31, down 1.9 percent from May 11-20, the China Iron and Steel Association said.
Rebar steel for October delivery on the Shanghai Futures Exchange, the most-active contract, eased 0.2 percent to 3,064 yuan per tonne.