Chinese steel futures steadied on Wednesday after iron ore indexes fell to two-month lows as mills remained wary of buying more raw material until they see a pickup in demand for their products.
Platts 62 percent iron ore benchmark IODBZ00-PLT fell $1 to $176 a tonne on Tuesday, extending its losing streak to a 14th consecutive day.
The index, widely used by global miners in setting quarterly contract prices, has lost 8.8 percent since hitting a record high of $193 in mid-February as demand from top iron ore buyer China thinned.
Two other key indexes also extended their declines. The Steel Index's 62 percent gauge .IO62-CNI=SI slipped $1.20 to $171.60 and Metal Bulletin's index .IO62-CNO=MB dropped $1.72 to $173.25.All three indexes are at their lowest levels since early January.
"As steel prices fell in China, iron ore prices are facing a lot of headwinds," said Henry Liu, regional head of Commodities Research at Mirae Assets.
Of the 80 million tonnes of iron ore stocks at Chinese ports, nearly 35 million to 40 million tonnes belong to traders, who were betting on a recovery in steel demand after the Lunar New Year holiday last month, said Liu.
"But we haven't seen any obvious pickup in steel demand, and to the disappointment of traders, steel prices have declined since the end of Lunar Near Year."
Shanghai steel rebar futures slipped 2 yuan to close at 4,771 yuan a tonne, slightly above the previous session's nadir of 4,755, its weakest since Dec. 1.
Iron ore prices have fallen steadily for around three weeks as Chinese steel producers, worried about the high cost of ore and falling steel prices trimmed purchases of overseas feedstock.
China's daily average crude steel output over Feb. 21-28 reached 1.912 million tonnes, up 5.5 percent compared with the previous 10 days, data from the China Iron and Steel Association showed on Tuesday.
On an annualised basis, China is set to produce 665 million tonnes, according to Reuters calculations -- in line with an output forecast of 660 million tonnes made by the Ministry of Industry and Information Technology last month.Iron ore exports from India's largest port of Mormugao fell 4.2 percent in February from a year earlier to 4.5 million tonnes, as higher taxes and an export ban from a southern state looked set to weigh further on shipments.
A Mormugao port official said exports to date from April 2010 were 36.7 million tonnes, versus 36.2 million tonnes from a year ago, which included iron ore from neighbouring Karnataka state before it imposed an exports ban.
By 0718 GMT, the 62 percent March iron ore futures contract on the Indian Commodity Exchange was nearly flat at 8,105 rupees ($180) per tonne, giving up some early gains.