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Iron ore volatile as traders temper China demand optimism

Singapore iron ore futures fell on Monday to their lowest in nearly three weeks, while Dalian prices see-sawed, as traders curbed their optimism about demand prospects in top steel producer China.

Iron ore’s benchmark March contract on the Singapore Exchange was down 1.2% at $123.40 a tonne, as of 0746 GMT. Earlier in the day it hit its weakest since Jan. 18 at $121.15, and on Friday marked its first weekly loss this year.

On China’s Dalian Commodity Exchange, the steelmaking ingredient’s most-active May contract DCIOcv1 ended daytime trade 0.9% higher at 853.50 yuan ($125.85) a tonne, rebounding after hitting a session-low 835 yuan.

In the spot market, the 62% Fe ore bound for China was assessed at $127 a tonne on Friday, based on SteelHome consultancy data SH-TOT-IRONINV. The benchmark grade hit its highest since mid-June at $130.50 on Jan. 30.

“We expect to witness some immediate downside for iron ore prices this week, as supply- and demand-side fundamentals temporarily loosen,” Navigate Commodities Managing Director Atilla Widnell said.

Steel demand in China has yet to pick up after the Lunar New Year holidays, partly indicated by rising inventories, while the production rate has marginally improved, analysts said.

The blast furnace capacity utilization rate among 247 steel mills across China surveyed by Mysteel consultancy was at 84.32% as of Feb. 2, up by 0.18 percentage point from Jan. 27.

Traders were seen waiting for signals of further policy support for the Chinese economy. However, China’s policymakers have ruled out flood-like stimulus even as they plan to show more support for domestic demand this year.

Other Dalian steelmaking inputs also erased early losses, with coking coal DJMcv1 and coke DCJcv1 up 1.8% and 0.4%, respectively.

Rebar on the Shanghai Futures Exchange SRBcv1 climbed 0.5% and hot-rolled coil SHHCcv1 rose 1%, while wire rod SWRcv1 shed 0.4%. Stainless steel SHSScv1 advanced 0.9%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Nivedita Bhattacharjee and Rashmi Aich)

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