Iron ore futures slipped to their lowest levels in a week on Monday, hurt by shrinking steel margins and expectations of lower steel production ahead of a military parade in China.

The most-traded January iron ore contract on China’s Dalian Commodity Exchange ended daytime trade 2.67% lower at 766 yuan ($107.09) a metric ton. It hit its lowest since August 20 at 761 yuan earlier in the session.

By 0700 GMT, the benchmark October iron ore (SZZFV5) on the Singapore Exchange lost 2.05% to $101.35 a ton, the weakest since August 25.

Narrower steel margins, coupled with expectations of lower hot metal output, have put pressure on ore prices, broker Hongyuan Futures said.

Analysts expect hot metal output, a gauge of iron ore demand, to fall sharply as steelmakers in Tangshan and other northern regions curb production to reduce air pollution ahead of a parade on September 3 to commemorate the end of World War Two.
Additionally, subdued steel demand in China, due to persistent property sector concerns, has squeezed steel margins and dented appetite for raw materials.

China’s manufacturing activity shrank for a fifth straight month in August, an official survey showed on Sunday, suggesting domestic demand remains sluggish.

“It’s the beginning of a poor week, with steel inventories piling up and weak manufacturing data,” a Singapore-based trader said.
Coking coal and coke, other steelmaking ingredients, hit their lowest in four weeks, down 3.29% and 3.54%, respectively.

Most steel benchmarks on the Shanghai Futures Exchange retreated. Rebar lost 1.89%, hot-rolled coil slid 1.58%, wire rod (SWRcv1) fell 1.54%, while stainless steel rose 1.13%.
Source: Reuters