SHANGHAI, Nov 27 (Reuters) - Chinese iron ore futures fell on Friday amid concerns that steel mills will further cut output due to shrinking demand, weighing on consumption of the raw material in top user China.
The benchmark May iron ore futures contract on the Dalian Commodity Exchange DCIOcv1 traded 2 percent lower at 304 yuan by the midday break. It was still set for a modest weekly gain.
Colder weather in northern regions is also expected to interrupt construction activities, a main consumer of steel products, forcing steel mills to curb output, while slower economig growth has already hurt demand for industrial metals.
"Iron ore prices are coming back to a rational range as fundamentals remain fragile. Steel mills are cutting output due to extreme tightness in cash flow and poor orders, so we see iron ore stocks at ports rise that will pressure the raw material," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI gained 0.5 percent to $43.60 a tonne on Thursday, after falling earlier in the week to its lowest since The Steel Index compiled indices in 2008. Prices were on track for a 3 percent fall this week.
The most-traded rebar futures contract on the Shanghai Futures Exchange SRBcv1 dropped 2 percent to 1,658 yuan by midday break.
Rebar and iron ore prices at 0330 GMT
Contract
Last
Change Pct Change
SHFE REBAR MAY6
1658
-33.00
-1.95
DALIAN IRON ORE DCE DCIO MAY6
304
-6.00
-1.94
SGX IRON ORE FUTURES DEC
42.43
-0.23
-0.54
THE STEEL INDEX 62 PCT INDEX
43.6
+0.20
+0.46
METAL BULLETIN INDEX
43.98
-0.09
-0.20
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day