Iron ore prices wobbled on Tuesday, as investors weighed rising freight costs due to a widening Iran conflict, which is choking shipments via the crucial Strait of Hormuz, against falling demand amid production restrictions among Chinese steelmakers.
An Iranian Revolutionary Guards senior official said on Monday that the strait was closed and that Iran would fire on any ship trying to pass, Iranian media reported, sending oil prices and shipping costs rocketing higher.
The most traded iron ore contract on China's Dalian Commodity Exchange closed daytime trade up 0.67 per cent at CNY753.5 ($109.32) a tonne. The benchmark April iron ore on the Singapore Exchange was down 0.21 per cent at $99.05 a tonne, as of 07:34 GMT.
"Right now, we are seeing an increase in freight costs, which is affecting many markets," said Tomas Gutierrez, head of data at consultancy Kallanish Commodities. Rising freight costs raised costs for iron ore and therefore aided ore prices, said analysts.
However, hot metal output, typically a gauge of iron ore demand, is expected to fall due to production curbs during China's annual parliamentary meeting starting March 5, keeping a lid on ore price upside. Some Chinese steel mills were required to cut output during the key meeting to ensure cleaner air.
Swelling portside iron ore inventory, currently at a record high, also suppressed ore prices. Other steelmaking ingredients gained traction in the afternoon trade.
Coking coal and coke climbed 4.01 per cent and 3.42 per cent, respectively, tracking surges in oil and gas prices. Most steel benchmarks on the Shanghai Futures Exchange lost ground.
Wire rod dipped 0.12 per cent, hot-rolled coil edged down 0.03 per cent, stainless steel shed 0.39 per cent while rebar nudged up 0.07 per cent.
(Reporting by Amy Lv and Lewis Jackson. Editing by Ronojoy Mazumdar and Harikrishnan Nair)