Iron ore market stabilizes

Iron ore futures contracts in China rallied in June as the market stabilized after the recent steep drop in prices that spurred interest from buyers. Oversupply, however, could limit further price recovery.

Despite a 13 percent decline in iron ore prices in May, Chinese imports of raw materials fell to 77.4 million tons in May from 83.4 million tons in April. According to the All-Russian customs broker " KBT ", imports from the largest consumer of raw materials may continue to decline on a monthly basis due to high the inventory of iron ore in Chinese ports and factories; and the decline in funding for iron ore in China.

Chinese steel mills are cutting long-term iron ore contracts in favor of cheaper local cargo. Contracts for the supply of iron ore in September at the Dalian Commodity Exchange closed at $ 110 per ton. Contracts rose 0.3 percent last week after falling in the previous five weeks.

At the same time, the most active contracts for reinforcing steel for October delivery on the Shanghai Futures Exchange fell 0.2 percent to 3064 yuan per tonne ($ 1 = 6.2384 Chinese yuan).

Iron ore ended the week almost 3 percent higher in its eight-week gain. It touched a 20-month low of $ 91.80 per tonne on May 30. Chinese factories that restrict steel production during the lean season of consumption from June to August could pose a threat to iron ore prices in the future.