By Emily Ou Yong
Iron ore futures fell on Tuesday, as losses at steel mills and sluggish domestic demand overrode support from Beijing's ongoing restrictions on Australian supplies.
The most-traded September iron ore contract on China's Dalian Commodity Exchange (DCE) COMEX:TIO1! traded 0.47% lower at 735.5 yuan ($108.18) a metric ton.
The benchmark August iron ore (SZZFQ6) on the Singapore Exchange was 0.36% lower at $97.85 a ton as of 0705 GMT.
Steel mill margins appeared in the red, with rebar producers losing an average of 71 yuan per ton at end-June, and hot-rolled coil mills losing 26 yuan per ton, according to a survey by consultancy Mysteel.
These are levels at which traders said mills may cut production and reduce their demand for iron ore, a key ingredient.
A seasonal slowdown in Chinese demand, compounded by tight mill margins squeezed by high coking coal prices, is weighing on sentiment across the ferrous ingredient, analysts at ANZ Research said in a note.
Iron ore losses were limited, however, by ongoing concerns over tightening supply, according to the analysts.
State-run iron ore buyer China Mineral Resources Group has restricted several domestic steel mills from purchasing any dollar-denominated cargoes of Fortescue's Super Special Fines product, expanding earlier curbs that targeted portside cargoes.
Seaborne arrivals at major Chinese ports last week also eased 2.916 million tons on-week, according to Mysteel data, offering some near-term price support.
Other steelmaking ingredients on the DCE fell, with coking coal NYMEX:ACT1! and coke (DCJcv1) down 1.24% and 0.77%, respectively.
Steel benchmarks on the Shanghai Futures Exchange were mixed. Rebar SGX:RBF1! fell 0.2%, hot-rolled coil COMEX:EHR1! slipped 0.21% and wire rod (SWRcv1) declined 0.45%. Stainless steel COMEX:HRC1! gained 1.86%.
($1 = 6.7989 Chinese yuan)