Seaborne iron ore prices dropped again on Tuesday as supply continued to pick up, boosting inventories. Chinese steel futures prices remained divided however, with hot rolled coil hit hard but rebar relatively stable.

The Kallanish index for 62% Fe Australian fines fell again by $1.13 to $46.62/dry metric ton cfr Qingdao. 170,000 tonnes of Carajas fines traded on globalORE at a $0.90/t premium to the Metal Bulletin 65% Fe index for November delivery.

The January 2016 rebar contract on the Shanghai Futures Exchange closed down CNY 9/t at CNY 1,779/t ($282/t), while the same contract for hot rolled coil closed down CNY 31/t at CNY 1,789/t. The sharp drop in HRC prices mirrors a similar weakness in spot prices, where lower rebar inventories have supported prices and HRC has taken the brunt of the difficult market.

Increasing iron ore supply is likely to mean a continuing decline in iron ore prices. That in turn is likely to undermine steel prices as real demand is not strong enough yet to engineer a rebound, at least until there is a sharp drop in steel production.

News last week from Brazil that its iron ore exports were increasing sharply mean more volumes arriving in China this month. Brazilian exports were up 7.6% year-on-year to 35.61 million tonnes during the month, 19.75mt of which was headed to China.