Iron ore under pressure from increased supply, high inventories

Iron ore futures declined on Tuesday, pressured by rising supply, although near-term demand helped limit losses.

Market sentiment weakened after reports that China Mineral Resources Group (CMRG) has cleared the sale of previously restricted BHP cargoes, following the settlement of a prolonged contractual dispute.

The return of these cargoes, alongside high inventories at Chinese ports and increasing global supply, continues to weigh on iron ore prices.

However, restocking activity by Chinese steel mills ahead of the May holidays has provided some short-term support, limiting downside pressure.

Chinese steel traders noted that high raw material costs are impacting mill profitability, while steel demand has yet to show a meaningful improvement. Recent increases in steel prices have also weighed on buying sentiment, leading to softer trading activity.

Rising steel production could further increase finished steel supply, potentially pressuring prices and margins. This may prompt mills to curb output, which could in turn affect iron ore consumption.

On the Dalian Commodity Exchange, the most-traded September iron ore contract fell by 0.89pct to 780.5 yuan (USD 114.1) per ton. Coking coal and coke futures declined by 0.51pct and 1.62pct to 1,266.5 yuan (USD 185) and 1,818 yuan (USD 266) per ton, respectively.

On the Shanghai Futures Exchange, rebar futures dropped by 0.66pct to 3,176 yuan (USD 464) per ton, while HRC futures fell by 0.82pct to 3,378 yuan (USD 494) per ton. Wire rod increased by 0.61pct to 3,280 yuan (USD 480) per ton, while stainless steel edged down by 0.2pct to 15,345 yuan (USD 2,244) per ton.

1 USD / 6.83 yuan