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Dalian iron ore gives up early gains on falling steel prices



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Singapore iron ore benchmark at lowest since May 26

Falling prices of other steelmaking ingredients weigh

Updates prices and adds bullet points

BEIJING, May 30 (Reuters) -Dalian iron ore futures gave up early gains on Tuesday to close daytime trade slightly lower, dragged down by falling prices of other steelmaking ingredients and steel products.

Coking coal DJMcv1 lost 2.36% and coke DCJcv1 dropped 2.32%, undermined by weak market fundamentals.

Rebar on the Shanghai Futures Exchange SRBcv1 declined by 0.83% to 3,460 yuan a tonne, hot-rolled coil SHHCcv1 fell 0.97% and wire rod SWRcv1 shed 0.58%.

That said, Dalian iron ore exhibited more resiliency than other ferrous metals, supported by high hot metal output and relatively low portside inventories.

The most-traded September iron ore on the Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trading 0.28% lower at 707.5 yuan ($102.36) a tonne, the lowest since May 26.

"Comparatively high hot metal output at the moment provided some support to iron ore demand," analysts at Huatai Futures said in a morning note.

Hot metal is a blast furnace product and its output is often used to gauge iron ore demand.

The average daily hot metal output among the surveyed 247 Chinese steel mills stood at 2.42 million tonnes last week, up 0.25% year-on-year but down 0.83% month-on-month, data from consultancy Mysteel showed.

"It seems that mills are increasingly less interested in taking initiative to cut their (steel) output, given that they could still make some money based on current production costs. Therefore, demand will be stable in the short term," analysts at Sinosteel Futures said in a note.

Meanwhile, portside iron ore inventories fell 2.2% month-on-month to 126.9 million tonnes as of May 26, according to data from consultancy Steelhome. On a year-on-year basis, the inventories were down 5.5%.

The U.S. dollar-based Singapore benchmark extended falls in afternoon trade, weighed down by concerns that the Federal Reserve may raise rates at its June 13-14 meeting to combat inflation amid stronger-than-expected economic data.

The most active June iron ore SZZFM3 on the Singapore Exchange was 2.04% lower at $100.7 a tonne, as of 0805 GMT.

Stainless steel SHSScv1 gained 0.41%.

($1 = 6.9121 Chinese yuan)



Reporting by Amy Lv and Dominique Patton in Beijing; Editing by Subhranshu Sahu

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