Dalian iron ore futures edged lower on Thursday as investors weighed an uncertain demand outlook against efforts to curb overcapacity in China, while record exports from major producer Brazil further pressured market sentiment.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) TIO1! ended daytime trade down 0.25% at 793 yuan ($110.47) a metric ton.

The benchmark September iron ore (SZZFU5) on the Singapore Exchange was flat at $101.8 a ton as of 0703 GMT.

“Iron ore futures retreated as investors weighed up a murky demand outlook against efforts to curb overcapacity that could lead to improvements in the economy,” said analysts from ANZ.

Brazil exported a record 41.1 million metric tons of iron ore in July, with the surge attributed to the progress of large projects in China and a resumption of domestic production.

China’s construction steel market is expected to transition from sentiment-driven gains to a more fundamentals-based trajectory in August, according to Chinese consultancy Mysteel.

The firm also noted that recent optimism in the sector is fading, with demand-supply dynamics returning to the spotlight.

The average daily hot metal production remains high and is expected to stay strong in August, while improving steel mill profits continue to support the prices of raw materials, said broker Hexun Futures.

Meanwhile, a weaker U.S. dollar provided some support to iron ore futures prices as expectations of rate cuts from the Federal Reserve grew amid concerns about partisanship creeping into U.S. institutions.

A softer dollar makes dollar-denominated assets more affordable to holders of other currencies.

Other steelmaking ingredients on the DCE gained ground, with coking coal NYMEX:ACT1! and coke (DCJcv1) up 2.29% and 1.71%, respectively.

Steel benchmarks on the Shanghai Futures Exchange were mostly up. Rebar RBF1! and wire rod (SWRcv1) climbed 0.03%, stainless steel HRC1! rose 0.54%, and hot-rolled coil EHR1! dipped 0.35%.
Source: Reuters