Reuters- Spot iron ore prices drifted $1 lower on Monday as steel mills in China continued to hold back purchases amid uncertainty over steel demand in the coming weeks.
Shanghai rebar futures fell to a more than two-week low, reflecting concern that accelerating inflation may force Beijing to further tighten liquidity, hitting steel demand in the world's top consumer and producer.
Chinese steel mills are also concerned that power shortages in most regions, which could be the worst in years, might force them to reduce production during the summer and weigh on demand further.
"The iron ore physical market continues in a state of confusion where buyers are perceiving prices should come down and sellers are not seeing any drastic corrections," London Dry Bulk said in a research note on Monday.
Steel futures were one of the reasons for the negative sentiment, it added.The most active October contract dropped to as low as 4,795 yuan ($738) per tonne, down 0.19 percent from the previous close.
Indian 63.5 percent iron ore fines were quoted at $187-189 per tonne, including freight, on Monday, down $1 from last week.
BHP Billiton Ltd, the world's biggest miner, said it saw the global economy remaining fragile in the near term and economic growth possibly slowing in the medium term.
However, Brazil mining giant Vale SA remained positive on iron ore prices, buoyed by rising steel production in China this year. Iron ore prices would likely remain stable in coming months, the executives said. Vale said prices rose 94 percent to $126 per tonne from the first quarter of 2010. Key iron ore indexes tracking spot prices in China and used by global miners like Vale and Rio Tinto Ltd in quarterly pricing fell last Friday.
The Steel Index .IO62-CNI=SI declined $1.8 to $180.7 per tonne, and the Platts 62 percent iron ore index IODBZ00-PLT fell $1 to $182.5 per tonne, both at their lowest since Apr.27.
Metal Bulletin's 62 percent gauge .IO62-CNO=MB lost $1.29 to $181.7 per tonne. ($1 = 6.493 yuan)