By Emily Ou Yong

Dalian iron ore futures struggled to find direction on Tuesday, as traders weighed stronger Chinese manufacturing data against mounting margin pressure at steel mills amid seasonally weak demand.

The most-traded September iron ore contract on China's Dalian Commodity Exchange (DCE) COMEX:TIO1! traded 0.13% higher at 743.5 yuan ($109.44) a metric ton, as of 0300 GMT.

The benchmark August iron ore (SZZFQ6) on the Singapore Exchange was 0.09% lower at $98.6 a ton.

Both contracts have lost almost 5% in June.

China's factory activity returned to expansion this month, driven by demand for chips, computers and other AI-related products, as robust export orders and front-loading to the United States to get ahead of tariffs offset weakness elsewhere in the economy.

The official manufacturing purchasing managers' index (PMI) rose to 50.3 in June from 50.0 in May, according to a survey by the National Bureau of Statistics (NBS), higher than the median forecast of 50.0 in a Reuters poll.

Stronger industrial activity typically lifts steel demand and, by extension, iron ore consumption, offering some support to prices.

Gains were however limited due to growing stockpiles at Chinese ports. Iron ore holdings at Chinese ports rose to around 160 million tons last week, a record for this time of year, according to consultancy Steelhome.

Sharply narrower profitability among Chinese steel mills is adding to the bearish tone. Mill profitability fell to about 51%, down from 59% a year earlier, according to data from consultancy Mysteel.

Costs have climbed since a fatal coal-mining accident in Shanxi last month pushed up prices, Australian bank ANZ said in a research note.

Thinner margins typically prompt mills to scale back output to preserve profitability, which would further dampen demand for iron ore, a key raw material input.

Other steelmaking ingredients on the DCE were mixed, with coking coal NYMEX:ACT1! up 0.39% and coke (DCJcv1) down 0.13%.

Steel benchmarks on the Shanghai Futures Exchange were mixed. Rebar SGX:RBF1! fell 0.16%, hot-rolled coil COMEX:EHR1! was little changed, and stainless steel COMEX:HRC1! dipped 0.54%. Meanwhile, wire rod (SWRcv1) advanced 2.67%.

($1 = 6.7936 yuan)