MELBOURNE (Reuters) - Chinese iron ore prices fell further on Tuesday, a day after posting their biggest daily drop in almost 10 months as high inventories and a weak domestic steel market pressure prices.
Near-term inventory risks have dampened the outlook for steel and iron ore prices short term, Argonaut said in a report, despite a relatively healthy global demand outlook.
Steel inventories stood at 19.5 million tonnes last week, slightly lower than the previous week, but remain at the highest level since 2014, Argonaut noted.
Meanwhile, stockpiles of imported iron ore at ports stayed at 159.18 million tonnes, in line with last week’s record. SH-TOT-IRONINV
“The record port inventory (has become) a key overhang over short-term,” Argonaut said.
The most traded iron ore contract DCIOcv1 on the Dalian Commodity Exchange, for May delivery, fell to $458 a tonne by 0210 GMT, having earlier touched the weakest since Nov. 3 at $455. Monday’s 4.5-percent drop was the steepest since May 24, 2017.
In Shanghai, the most-traded steel rebar contract SRBcv1 dropped 1.4 percent to 3,625 yuan a tonne, having posted its lowest close since Oct. 31 in the previous session.
“Market sentiment remains weak. End users are not buying and traders have pressure to sell and are worried about their cash liquidity,” said a trader in Shanghai.
“Now they are watching to see if demand can pick up after the party congress.”
Steel has also come under pressure after China’s winter pollution controls expired last week. The pollution controls had restricted steel-making in the world’s largest producer of the metal.
Elsewhere, iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell 3.4 percent to $67.45 a tonne, according to Metal Bulletin.
Other steel inputs coke DCJcv1 fell 0.7 percent while coking coal DJMcv1 eased 0.1 percent.
Reporting by Melanie Burton; editing by Richard Pullin