Iron ore futures in China rise amid speculation in the market

Iron ore futures in China fell for a second straight session on Wednesday, as the market expected clarity on the extent of the supply disruption following Vale SA's dam closure.

Steel prices also fell, with the most active rebar contract ending on day two, as concerns over weak demand in China persist.

The best-selling iron ore on the Dalian Commodity Exchange fell 3.3 percent to 624 yuan ($ 92.34) a tonne after hitting 615 yuan at the start of the session. Steel raw materials hit a record high of 657.5 yuan on Tuesday, but fell after the eighth session.

“I think this is just natural volatility after such a big supply shock,” said Daniel Hines, senior commodity strategist at ANZ. "Currently, no one is sure how things will develop (in Brazil) in the near term."

The Brazilian mining company Vale, the world's largest iron ore producer, announced force majeure on some iron ore contracts after a court order shut down a mine responsible for nearly 9 percent of its production following a tailings dump explosion that, likely resulted in the deaths of over 300 people.

Force majeure came after the court ruled to stop using eight tailings. Analysts raised their forecasts for iron ore production to 70 million tons from 40 million tons initially.

Other steel ingredients were also lower, with coking coal falling 0.4% to 1,279 yuan a tonne, while coke was down 1.7% to 2,066 yuan.

The most active rebar contract on the Shanghai Futures Exchange fell 2.5 percent to 3702 yuan. Hot rolled coil fell 2.1 percent to 3,608 yuan.

“It probably has something to do with the economic outlook in China. We'll wait and see how the data comes out this week. I suspect the market is a little nervous, ”Hynes said.

China's trade mechanism was likely stuck in the opposite direction in January. Data is expected on Thursday that imports and exports will fall for the second straight month, reinforcing fears that the economy could undergo a sharp slowdown.