Iron ore prices dropped on Wednesday for a second consecutive session, as rising supply outweighed strong short-term demand for the steelmaking ingredient.

The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) TIO1! closed daytime trade 0.64% lower at 777.5 yuan ($108.70) a metric ton.

The benchmark September iron ore (SZZFU5) on the Singapore Exchange was flat at $102.35 a ton, as of 0714 GMT.

Healthy steel margins drove daily hot metal output to hover around 2.4 million tons, generating firm demand for raw materials, including iron ore, and arresting a price slump.

Profit among Chinese steelmakers spiked by 5175% to 64.4 billion yuan in the first seven months, according to data from the National Bureau of Statistics, while China’s industrial profits fell for a third consecutive month in July.

Meanwhile, analysts said iron ore supply is expected to rise in the remainder of the year, putting further pressure on prices.

Shipments from key supplier Australia missed expectations in the first half of the year following cyclones-led disruptions earlier in the year.

Moreover, downstream steel consumption showed signs of softening as demand from manufacturing fell, broker Galaxy Futures said.

Steel inventories rose to 15.67 million tons during August 11-20, up 4% from the prior 10-day period, data from the state-backed China Iron and Steel Association showed.

Doubts are growing over whether steel demand will see the usual seasonal rebound in September as anticipated.
Soft demand for steel could dent appetite for feedstocks.

Meanwhile, other steelmaking ingredients, coking coal NYMEX:ACT1! and coke (DCJcv1), fell 3.87% and 2.82%, respectively.

Steel benchmarks on the Shanghai Futures Exchange lost ground. Rebar RBF1! slipped 0.48%, hot-rolled coil EHR1! shed 0.92% and wire rod (SWRcv1) fell 1.22% and stainless steel HRC1! nudged 0.12% lower.
Source: Reuters