Chinese iron ore futures struggled to regain ground on Tuesday after recent sharp losses that drove the steelmaking commodity to its weakest since November and pulled down spot prices to below $70 a ton for the first time in three months.
Lean demand in top consumer China has kept iron ore stocks at its ports near a record high of around 159 million tons, enough to build Australia's Sydney Harbour Bridge almost 1,900 times over.
Iron ore demand has been slow while a mountain of steel stocks in China built by traders in anticipation of a strong pickup in construction demand following last month's Chinese Lunar new year holidays has yet to show.
The most-actively traded iron ore for May delivery on the Dalian Commodity Exchange was flat at 480 yuan ($75.84) a ton by 5 pm. The contract, down 9 percent this year, hit 475.50 yuan on Monday, the lowest since November 20.
The weakness in futures pulled down bids in the physical market with the benchmark iron ore for delivery to Qingdao port in East China's Shandong Province.
Oversupply fears in China's steel market had spurred similar concerns in iron ore, said Vivek Dhar, an analyst at the Commonwealth Bank of Australia.
"Markets are worried that China's steel mills will struggle to clear [their] excess steel inventory, which has built up in anticipation for stronger demand during the construction season," Dhar said in a note.
Inventory of construction product rebar at Chinese traders reached 9.64 million tons on Friday, the most since April 2013, data compiled by SteelHome consultancy showed.
"We think there are valid concerns over China's steel consumption this year, particularly as China's property sector faces headwinds from policy. More broadly, a clampdown on credit growth will weigh on China's commodity demand this year," said Dhar.
"Traders are selling at a loss to secure cash, but it's not a big selloff yet," he said.
