MANILA: Dalian iron ore futures slipped on Thursday as depressed steel margins in China outweighed hopes for the usual seasonal rise in the steelmaking ingredient's demand from the world's top steel producer. Iron ore's most-active September contract on China's Dalian Commodity Exchange closed down 0.3% at 845.50 yuan ($120.87) a tonne, after rising for two sessions.
The most-active August contract on the Singapore Exchange, however, rose 0.7% to $108.10 a tonne in afternoon trade. "While steel mill margins, especially rebar margins, show some early signs of stabilization, they remain depressed and we believe this has to pick-up further in order to have any meaningful uptick in production rates," said Hui Heng Tan, a Singapore-based analyst at commodity broker Marex Spectron.
Chinese steel mills are facing squeezed margins due to rising cost of raw materials, with iron ore's benchmark spot prices scaling the highest in nearly a year on Wednesday at $113.50 a tonne, based on data from SteelHome consultancy.
"Our latest assessment of existing steel rates continues to show further slowdown," Tan said in a note. Construction steel rebar on the Shanghai Futures Exchange rose 0.5% in a volatile session.
"At present, there are still heavy rainfall in the south, and the flood disaster is still severe," analysts at Sinosteel Futures Co Ltd in Beijing wrote in a note.
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