MANILA: Iron ore futures in China fell for a second straight session on Wednesday, reflecting concerns over higher supply that could add to record stockpiles of the steelmaking raw material in the world’s top buyer.

Top iron ore producer Vale has said it expects output to rise to 390 million tonnes this year from 365 million tonnes in 2017, helped by a ramp-up at its S11D mining project.

Part of that additional tonnage could find its way into China where stocks of imported ore at its ports reached an all-time high of 154.4 million tonnes last week.

The most-active iron ore on the Dalian Commodity Exchange closed down 1.1 percent at 522 yuan ($82) a tonne, having hit 518 yuan earlier, near Tuesday’s three-week trough.

“I think it’s more a case of markets looking at the potential for increased supply and also the possibility that demand might slow down seasonally,” said Ric Spooner, chief market analyst at CMC Markets.

Profit margins at Chinese steel mills might also narrow when supply normalises after production curbs in China are lifted in March, said Spooner, which could limit their buying appetite for raw material.

The output restrictions, in place since November as China fights smog over winter, have helped tighten supply and boosted margins.

“(The port) stocks are certainly not helping although it’s notable that we also had a rally in iron ore in the face of high stocks,” he said.

Iron ore for delivery to China’s Qingdao port slid 3 percent to $74.29 a tonne on Tuesday, its weakest level since Dec. 29, according to Metal Bulletin.

Steel traders are also cautious in building up inventories further.

“The market is still watching closely if there is a new wave of restocking activity from traders as well as if the stockpiles are piling up,” said a futures analyst in Shanghai, declining to be named as she’s not authorised to speak to media.

“I am not certain at the moment and I expect prices to fluctuate in near term.”

Stocks of construction steel product rebar among Chinese traders have risen to 3.81 million tonnes on Jan. 19, from a record low of 2.84 million tonnes in mid-December, according to data from SteelHome consultancy.

The most-traded rebar on the Shanghai Futures Exchange rose 0.8 percent to end at 3,937 yuan a tonne, but was still 4 percent lower than a three-month high reached in early December.—Reuters