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China iron ore extends losses after steeper fees hit steel

service@ironoreteam.comMon Aug 14, 2017 11:35am GMT

Chinese iron ore futures dropped more than 4 percent on Monday, adding to the previous session's steep losses, as steel prices extended declines after the Shanghai exchange increased transaction fees to fight speculative trading.

The higher fees followed a rally in rebar futures last week to their highest since 2013 amid strong volumes, which the China Iron and Steel Association said was largely driven by speculative investors.

The most-traded iron ore for January delivery on the Dalian Commodity Exchange closed down 4.4 percent at 527 yuan ($79) a tonne. The contract touched an intraday low of 524.50 yuan, its weakest since July 31.

Iron ore has largely tracked the movement in steel prices, dropping nearly 5 percent on Friday as rebar steel futures fell 2.7 percent just before the Shanghai Futures Exchange raised fees.

The bourse also said it would limit intraday positions for non-member firms and clients on rebar futures contracts for delivery in October and January from Aug. 15.

The most-active January rebar in Shanghai slipped 2.6 percent to end at 3,807 yuan a tonne, after hitting a one-week low of 3,786 yuan earlier in the session.

ANZ senior commodity strategist Daniel Hynes said news of increased trading charges on the Shanghai Futures Exchange "weighed on investor appetite".

"Weaker restocking demand also prompted iron ore prices lower," Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

The drop in prices of the steelmaking raw material came despite a fall in iron ore stockpiles at China's ports last week.

Iron ore inventory at China's major ports stood at 137 million tonnes on Friday, down 2.15 million tonnes from the prior week, according to data tracked by SteelHome consultancy. SH-TOT-RBARINV

Port stocks reached a record 141.45 million tonnes in June.

Iron ore for delivery to China's Qingdao port .IO62-CNO=MB fell 1.9 percent to $75.19 a tonne on Friday, according to Metal Bulletin, a day after hitting a four-month high.

This year's surge in steel prices had fattened margins at Chinese producers, prompting them to boost production. China's crude steel output rose 10.3 percent from a year ago to a record 74.02 million tonnes in July, government data showed.