By Emily Ou Yong
Iron ore futures fell on Friday, as record-high inventories at Chinese ports outweighed support from China's move to restrict the use of certain Fortescue ASX:FMG products.
The most-traded September iron ore contract on China's Dalian Commodity Exchange (DCE) COMEX:TIO1! fell 1.74% to 734 yuan ($108.28) a metric ton, taking its weekly loss to 0.67%.
The benchmark August iron ore (SZZFQ6) on the Singapore Exchange was 0.46% lower at $97.8 a ton.
China's state-owned iron ore buyer, China Mineral Resources Group (CMRG), has notified some mills verbally that from July 15 they must not take delivery of portside cargoes of Fortescue's Super Special Fines and Fortune Fines, both of which are lower-grade iron ore products.
However, the market has grown increasingly sceptical of such supply-restriction moves as lasting price catalysts.
"We're now seeing the market come to the realisation that holding out against CMRG in protracted long-term contract agreements causes nothing but temporary short-term bottlenecks in taking receipt of cargoes," said Atilla Widnell, managing director of Navigate Commodities.
"As such, recent rallies quickly fade as bears use them as opportunities to sell into."
Analysts at ANZ said any meaningful price recovery was unlikely because portside inventories in China were already near a record 160 million tons, citing consultancy Steelhome.
That leaves mills with ample supply and reduces the need to bid for seaborne cargoes.
Other steelmaking ingredients on the DCE rose, with coking coal NYMEX:ACT1! and coke (DCJcv1) up 1.34% and 1.71%, respectively.
Steel benchmarks on the Shanghai Futures Exchange declined across the board. Rebar SGX:RBF1! fell 0.39%, hot-rolled coil COMEX:EHR1! shed 0.3%, wire rod (SWRcv1) lost 0.42% and stainless steel COMEX:HRC1! slipped 0.27%.
($1 = 6.7790 Chinese yuan)