* Other steelmaking raw materials also pull back
* China steel mills chase low-grade ore to cut costs
By Enrico Dela Cruz
MANILA, June 13 (Reuters) - China’s iron ore futures declined on Thursday as market participants locked in some gains after the steelmaking feedstock’s three-day surge to record highs earlier this week.
But expectations of tight supply and brisk demand were seen intact, limiting the downside.
The most-actively traded September 2019 iron ore contract on the Dalian Commodity Exchange fell as much as 1.5% to 758 yuan ($109.57) a tonne in early trade, before recovering some ground to trade 0.3% lower by 0243 GMT.
The benchmark contract gained nearly 9% in the last three sessions, hitting an all-time high of $778.5 yuan a tonne on Wednesday, as market participants priced in expectations that supply would not improve in the second half of the year.
Providing additional support to prices was the demand outlook for steelmaking ingredients as China may roll out more infrastructure projects to support its slowing economy.
“I haven’t seen any significant changes in the fundamentals. Some market participants just took profits... It’s a short-term correction,” said Richard Lu, a senior analyst at metals consultancy CRU Group’s Beijing office.
Some short-term concerns about steel demand slowing in China as the peak season has passed, may have resurfaced, he said, explaining Thursday’s selling pressure across the country’s ferrous complex.
“But fundamentally, there’s some support for iron ore. It’s a tight market, with port inventories in China currently very low,” Lu said. “That’s why steel mills have to be active in securing cargoes.”
Imported iron ore inventories at Chinese ports have declined to 121.6 million tonnes, the lowest since early 2017, latest data compiled by SteelHome consultancy showed SH-TOT-IRONINV, amid reduced shipments from top suppliers in Brazil and Australia.
The surge in iron ore prices has resulted in a slump in profit margins for Chinese steel mills, prompting them to scramble for lower grade supply to cut costs.
Thursday’s selling pressure pulled down the benchmark coking coal contract by as much as 1.7% to 1,395 yuan a tonne. Coke fell as much as 2.2% to 2,113.5 yuan.
The most-actively traded October 2019 construction steel rebar contract on the Shanghai Futures Exchange slipped as much as 1.1% to 3,764 yuan a tonne. Hot rolled coil lost 1.1% to 3,605 yuan.
$1 = 6.9181 yuan Reporting by Enrico dela Cruz; Editing by Subhranshu Sahu