Iron ore price slips as Chinese steelmakers face margin pressure

The iron ore price fell on Wednesday as reduced profitability at Chinese steel mills following a recent rally in prices of steelmaking ingredients weighed on sentiment.

Benchmark 62% Fe fines imported into Northern China fell 0.3% Wednesday morning, to $145.84 per tonne.

The most-traded iron ore contract for September delivery on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 0.5% lower at 926.50 yuan ($138.85) a tonne.

A rally that began in late May had propelled Dalian iron ore to a 10-month high on Monday, underpinned by renewed optimism around demand in China.

Worries about shrinking stocks of imported iron ore at Chinese ports had added fuel to that rally. 

“The short-term drive is upward but the valuation is on the high side, and the risk of volatility will increase in June-July,” Zhongzhou Futures analysts said in a note.

“Iron ore fluctuates at a high level,” Zhongzhou analysts said, blaming low profits that have prompted mills to be cautious on purchases.