Iron ore retreated further after a spike higher at the start of the week, reflecting continued pressure from a well-supplied market and as Chinese
steel prices slipped for the second session to trade near a record low on Wednesday.
Iron ore has fallen 37 percent this year as growth in supply from low-cost producers Australia and Brazil has outstripped demand in China, the biggest buyer of the steelmaking commodity.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI dropped 0.8 percent to $84.50 a tonne on Tuesday, a day after soaring almost 4 percent, the biggest rise since March, according to data compiled by Steel Index.
A surge in Chinese spot steel prices over the weekend helped fuel iron ore's surge on Monday.
But prices have since retreated, with billet in China's key Tangshan area dropping 20 yuan a tonne on Tuesday, "fast removing the fragile industry confidence that had been building since late last week", Standard Bank analyst Melinda Moore said in a note.
On Wednesday, the most active rebar steel contract for January delivery on the Shanghai Futures Exchange slipped 0.5 percent to 2,789 yuan ($454) a tonne, not far above the record low of 2,725 yuan hit last week.
"It's a very unclear market at this point," said an iron ore trader in Shanghai who has two 90,000 tonne cargoes arriving in October and November that would be priced off the average cost of the raw material for those months.
"Since my pricing hasn't started, I'm not really pressured yet to exit my position."
Worries over China's cooling property sector have clouded the outlook for the country's steelmakers, some of which, led by big producer Baoshan Iron and Steel, have cut prices for October bookings.
But expectations that Chinese steel mills would replenish stockpiles of iron ore ahead of the Oct. 1-7 National Day holiday may lend support to prices, traders said, along with hopes that the authorities will stimulate economic activity.
China's central bank is injecting a combined 500 billion yuan ($81.35 billion) of liquidity into top banks to support the economy, the Wall Street Journal reported, sending benchmark money market rates sharply lower on Wednesday.
Iron ore for January delivery on the Dalian Commodity Exchange was off 0.3 percent at 595 yuan a tonne.
Source: Reuters