Iron ore futures are experiencing a downturn, primarily driven by weakened steel margins in China, which has led to a cautious restocking approach by Chinese steel mills and concerns about production cuts. The most-traded iron ore contract on the Dalian Commodity Exchange fell by 0.95% to 730.5 yuan ($108.8) per ton. This market sentiment is further exacerbated by the Dalian Commodity Exchange's tighter trading measures aimed at curbing excessive speculation ahead of upcoming holidays, contributing to the overall decline.
The import margins for iron ore have significantly narrowed, falling from 6.22 yuan per metric ton to 4.02 yuan per metric ton, largely due to decreasing spot prices. Data indicates that China's blast furnace operating rate has dropped by 0.48 percentage point week-on-week to 89.08%, with average daily pig iron output decreasing by 5,200 metric tons to 2.4028 million metric tons. Mills facing losses are increasingly undergoing maintenance, which further weighs on iron ore prices from a fundamental perspective. Additionally, discussions surrounding long-term iron ore contracts are generating expectations of lower import prices, making mills hesitant to purchase at current spot rates.
The market is also influenced by other steel-related futures, with hot rolled coil (HRC) futures on the Shanghai Futures Exchange falling by 0.47% to 3,365 yuan ($501) per ton, and rebar futures declining by 0.57% to 3,146 yuan ($469) per ton. Wire rod futures also dropped by 0.67% to 3,393 yuan ($506) per ton, while stainless steel futures saw a slight increase of 0.11% to 13,805 yuan ($2,057) per ton. Despite the broader weakness, some support for market sentiment comes from declining steel inventories held by traders and Baosteel's decision to raise October domestic steel prices for most flat steel products by 200 yuan ($30) per ton, signaling stronger expectations from major mills.
