Chinese iron ore futures struggled to regain ground on Tuesday after recent sharp losses that drove the steelmaking commodity to its weakest since November and pulled down spot prices to below $70 a tonne for the first time in three months.
Lean demand in top consumer China has kept iron ore stocks at its ports near a record high around 159 million tonnes, enough to build Australia's Sydney Harbour Bridge almost 1,900 times over.
Iron ore demand has been slow amid a mountain of steel stocks in China built by traders in anticipation of a strong pickup in construction demand after last month's Lunar New Year that has yet to show.
The most-actively traded iron ore for May delivery on the Dalian Commodity Exchange was flat at 481.50 yuan ($76) a tonne by 0216 GMT. The contract, down 9 percent this year, hit 475.50 yuan on Monday, the lowest since Nov. 20.
The weakness in futures pulled down bids in the physical market, with the benchmark iron ore for delivery to China's Qingdao port slipping 0.2 percent to $69.93 a tonne on Monday, its weakest since Dec. 11, according to Metal Bulletin.
Oversupply fears in China's steel market had spurred similar concerns in iron ore, said Vivek Dhar, analyst at Commonwealth Bank of Australia.
"Markets are worried that China's steel mills will struggle to clear (their) excess steel inventory, which has built up in anticipation for stronger demand during the construction season," Dhar said in a note.
Inventory of construction product rebar at Chinese traders reached 9.64 million tonnes on March 9, the most since April 2013, data compiled by SteelHome consultancy showed.
"We think there are valid concerns over China's steel consumption this year, particularly as China's property sector faces headwinds from policy. More broadly, a clampdown on credit growth will weigh on China's commodity demand this year," said Dhar.
The most-traded May rebar on the Shanghai Futures Exchange was up 0.2 percent at 3,728 yuan a tonne, having touched a 3-1/2-month low of 3,663 yuan on Friday.
"The current situation is the market isn't sure if it's slow recovery in demand or demand will be just weak," said a research head at a trading firm in Hangzhou, on the outlook for steel consumption.
"Traders are selling at a loss to secure cash, but it's not a big selloff yet," he said.
Coking coal futures fell 1.8 percent to 1,267.50 yuan a tonne and coke dropped 1.3 percent to 2,008.50 yuan.
($1 = 6.3220 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Additional reporting by Ruby Lian; Editing by Joseph Radford)
