Dalian iron ore rangebound on mounting caution, overseas holiday

Dalian iron ore futures were rangebound on Monday, as investors were wary of mounting downside risks from potential intervention by Chinese authorities and faced a lack of direction given Singapore markets were closed for the Christmas holiday. The most-traded May iron ore on China's Dalian Commodity Exchange (DCE) ended daytime trading 0.26% lower at 970.5 yuan ($135.98) a metric ton, giving up earlier gains. The decline followed a 3% rise on Friday. The benchmark January iron ore contract on the Singapore Exchange was untraded due to the holiday. It hit a ten-month high on Friday, when it approached $140 a ton. The government in top consumer China could intervene after a price rally, analysts said.

The benchmark January iron ore SZZFF4 contract on the Singapore Exchange was untraded due to the holiday. It hit a ten-month high on Friday, when it approached $140 a ton.The government in top consumer China could intervene after a price rally, analysts said. Prices of the key steelmaking ingredient have risen more than 3% in the past week, in part on news that major Chinese banks cut interest rates on some deposits. "Ore demand weakened marginally, but the market is still holding an expectation of a wave of winter restocking from steelmakers," analysts at Sinosteel Futures said in a note.

Chinese steelmakers typically replenish raw materials to sustain production needs over the Lunar New Year holiday break, which usually lends some support to ore prices. Other steelmaking ingredients on the DCE also declined, with coking coal DJMcv1 falling 1.47% and coke DCJcv1 down 1.88%. Steel benchmarks on the Shanghai Futures Exchange were mixed amid seasonally sluggish demand and reduced supply due to production restrictions among some mills.

Rebar SRBcv1 ticked down 0.15%, wire rod SWRcv1 lost 2.8%, while hot-rolled coil SHHCcv1 added 0.19% and stainless steel SHSScv1 advanced 1.37%. A few cities in northern China including the steel production hub Tangshan, have announced plans to initiate emergency responses, citing worsening air pollution. Local steelmakers are typically required to curb production in such situations, weighing on demand for steelmaking raw materials and supporting prices of steel products.

(With Reuters inputs)