China’s iron ore futures slid as much as 2.2 percent on Friday, pressured anew by plentiful supply of the raw material as steel producers kept on unloading excess cargoes back into the market.
Prices touched seven-week highs earlier this week, backed by similar gains in steel futures on hopes increased infrastructure spending in China would spur demand. But traders say supply continues to outstrip demand amid a weak Chinese property market.
Chinese rebar steel futures dropped more than 1 percent.
“Most of the supply is not coming from traders but from medium-sized to big mills which are reselling cargoes back into the market for a quick profit,” said an iron ore trader in Shanghai who was offering around four capesize cargoes from mills.
Chinese steel mills, the world’s biggest buyers of iron ore, have been paring back on their long-term supply contracts with miners and opting to buy cheaper spot cargoes as prices fell more than a quarter this year.
Iron ore for September delivery on the Dalian Commodity Exchange was down 1.8 percent at 699 yuan ($110) a tonne by midday after falling to as low as 696 yuan, its weakest since July 7. The contract is on course for a third weekly decline.
Chinese Premier Li Keqiang said economic growth of slightly more or less than 7.5 percent this year would be acceptable as long it still led to new jobs and higher wages, the official Xinhua news agency reported late on Thursday.
The world’s No. 2 economy grew 7.5 percent in the second quarter, slightly faster than the 7.4 percent pace in January-March, reflecting government efforts to prop up activity.
But analysts said Beijing will probably need to offer more support to meet its annual growth target of 7.5 percent in the midst of a slowing property market.
Average new home prices in China fell in June from May for a second straight month and are expected to continue declining in coming months, a challenge to Beijing if prices fall too sharply and weigh further on the broad economy.
The most-traded rebar contract for delivery in January on the Shanghai Futures Exchange was down 1.2 percent at 3,093 yuan a tonne by midday.
Iron ore futures in Singapore also retreated. The August contract on the Singapore Exchange was down 1.5 percent at $95.95 a tonne by 0352 GMT, and September was off 1.6 percent at $95.64.
Benchmark 62-percent grade iron ore for immediate delivery to China .IO62-CNI=SI slipped half a percent to $97.50 a tonne on Thursday, according to data compiled by Steel Index.
Before Thursday’s decline, spot iron ore prices have recovered to a seven-week top of $98 a tonne this week, although traders said the buying momentum has stalled.
But demand for high-quality iron ore lump was brisk, lifting premiums to more than a dollar per tonne from 33-40 cents last week, said a trader in China’s eastern Shandong province who just bought an 80,000-tonne lump cargo.
“There’s not much lump ore available at the ports and the offered volumes in the spot market is limited,” he said.