Steel Market Update

Advisory Bazaar Info Services

Iron Ore Extends Decline for Third Session

Iron ore prices fell for the third consecutive session, putting the market on track for its first weekly decline in three weeks.

* On the Dalian Commodity Exchange (DCE), the most-active iron ore contract fell 1.98% to 716.5 yuan ($106.77) per metric ton.

* Iron ore prices are down 1.4% this week, marking the biggest weekly decline since late July.

* On the Singapore Exchange (SGX), the October iron ore benchmark declined 1.21% to $97 per ton, its lowest level since August 24.

Weak Steel Margins Pressure Iron Ore Demand

Weak steelmaking margins have prompted Chinese steel mills to reduce production, weighing on iron ore demand and investor sentiment.

Average daily hot metal production declined 0.2% to 2.36 million tons. Meanwhile, only 7.8% of steel mills are currently profitable, sharply lower than 30% a week earlier.

Rising Supply Adds to Price Pressure

Analysts expect China to remain unlikely to enter a new structural supercycle. At the same time, increased supply from projects such as Simandou could add further pressure on iron ore prices.

Other key steelmaking raw materials also weakened, with coking coal down 1.71% and coke down 1.76%.

Steel Benchmarks Also Decline

Steel benchmarks on the Shanghai Futures Exchange (SHFE) also traded lower:

* Rebar: -0.99%

* Hot-Rolled Coil: -0.92%

* Stainless Steel: -1.48%

Market Outlook: Weak steel mill margins, production cuts and expectations of higher iron ore supply are likely to keep pressure on iron ore and steel prices in the near term.