Iron ore extends losses on concerns of demand prospects

BEIJING, March 22 (Reuters) - Dalian and Singapore iron ore futures extended losses on Wednesday, with demand prospects temporarily weighed down by China's consideration to cut its crude steel output by around 2.5%.

The target was proposed by policymakers at a meeting last week but it has not yet been finalised, said sources familiar with the matter, adding that some officials at last week's meeting said a cut of 2.5% was too high as the economy was still recovering and the target was expected to be set before the end of June.

The most-traded May iron ore futures contract on the Dalian Commodity Exchange (DCE)DCIOcv1 traded 1.47% lower at 871.5 yuan ($126.54) a tonne as of 0209 GMT, its lowest since February 15.

On the Singapore Exchange, the benchmark April iron ore SZZFJ3 was 1.53% lower at $121.6 a tonne as of 0222 GMT, the lowest since Feb. 14.

"The news [of crude steel output cuts] may provoke worry in the raw materials market in the short run," said Kevin Bai, a Beijing-based steel analyst at consultancy CRU group.

Likewise, prices of other steelmaking ingredients such as coking coal and coke slipped further with the former DJMcv1 declining 1.68% and the latter DCJcv1 falling 1.24%.

"Supply [of coking coal] picked up after many coal producers resumed production following the accident earlier last month while consumers and traders slowed their purchasing. Mounting inventories weighed on prices," analysts at Huatai Futures said in a note.

Steel prices continued to feel the pressure from the raw materials market. Rebar on the Shanghai Futures Exchange SRBcv1 slid by 1.27% to 4,135 yuan a tonne, hot-rolled coil SHHCcv1 dipped 0.65%, wire rod SWRcv1 shed 2.14% and stainless steel SHSScv1 lost 0.41%.

"The cost support to steel prices receded to some degree after prices (of raw materials) have recently posted evident falls," analysts at Everbright Futures said in a morning note.