Iron ore: price hits nearly 2-month low

Chinese iron ore futures fell as much as 7 percent Tuesday, touching their lowest in nearly two months, fueled by fears of higher interest rates and still stagnant domestic demand.

The U.S. Federal Reserve approved a half-point increase in interest rates last week and said it may stick to that level for the next two or three meetings and then assess the response of the economy and inflation before deciding whether further increases are needed.

This has led to a significant drop in dollar-denominated commodity prices, such as iron ore. Meanwhile, tight profit margins for steel producers and controls on overall steel production have curbed production increases and eroded demand for steelmaking ingredients.

The most active iron ore futures at China’s Dalian DCIOcv1 commodity exchange, with delivery in September, fell as much as 7% to 756 yuan ($112.71) per ton, the lowest since March 16.

Quotations fell 4.1 percent to 779 yuan per ton, extending losses into the third day. On the Singapore Exchange, the most-traded June iron ore contract, SZZFM2, fell 3.1 percent to $123.45 a ton.

Dalian DJMcv1 coking coal futures slipped 2.1 percent to 2,610 yuan per ton and DCJcv1 coke prices fell 1.9 percent to 3,343 yuan per ton.

Steel prices on the Shanghai Futures Exchange also declined, with rebar SRBcv1 (October delivery) down 1.5 percent to 4,607 yuan per ton and hot-rolled coils SHHCcv1 giving up 1.7 percent to 4,698 yuan per ton.

The June stainless steel contract on the Shanghai Stock Exchange SHSScv1 gave up 1.4 percent to 18,840 yuan per ton.

China’s central bank said Monday it would step up support for the slowing economy by closely watching domestic inflation and monitoring policy adjustments in developed economies.