Iron ore price drops on Chinese demand fears

China is becoming an increasingly price-sensitive buyer. (Stock Image)

Iron ore prices fell on Monday as mounting steel stocks and rising portside iron ore inventory indicated a slow recovery in demand from China.

Benchmark 62% Fe fines imported into Northern China fell 2.82%, to $122.13 per tonne, the lowest in a month.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange ended daytime trade 2.2% lower at 841.50 yuan ($123.23) a tonne.

“Industrial metals markets will need to wait for February and March economic data to get a true sense of the health of the Chinese economy,” Navigate Commodities Managing Director Atilla Widnell said.

Traders were cautious, despite data showing new bank loans in China jumped more than expected to a record 4.9 trillion yuan ($717.21 billion) in January, while new home sales in 16 Chinese cities rose for the second straight week.

“The profits of steel mills have not improved,” Huatai Futures analysts said in a note. “The continuous increase in inventory will cause short-term adjustments in finished product prices.”

Steel inventories held by Chinese traders, which have been steadily rising since late December, increased by 1.5 million tonnes over February 3-9, according to Mysteel consultancy’s latest stocks survey.

Meanwhile, portside iron ore inventory climbed last week to 138.5 million tonnes, the highest since mid-September, SteelHome consultancy data showed.

(With files from Reuters)