By Ruth Chai
SINGAPORE, March 18 (Reuters) - Iron ore futures declined on Wednesday as rising freight rates impeded steel exports, while Chinese steel mills held prices firm on high energy costs, thereby limiting procurements.
The most-traded May iron ore contract on China's Dalian Commodity Exchange (DCE) DCIOcv1 traded 0.55% lower at 807.5 yuan ($117.35) a metric ton, as of 0324 GMT.
The benchmark April iron ore SZZFJ6 on the Singapore Exchange was 1.33% lower at $107.35 a ton.
Rising freight rates due to the Middle East war have made it harder to export finished steel products, as shipowners refused to commit tonnage while waiting for the market to stabilise, and high energy costs have forced steel mills to hold prices firm, resulting in limited transactions, a Shanghai Metals Market report said.
A fall in Chinese steel production in January and February intensified pressure on iron ore demand, with steel mills holding off on building up inventories amid uncertain demand prospects, an ANZ note said on Wednesday.
Demand for certain iron ore types has also undergone a structural shift, with IOCJ fines and PB lump fines destocking rapidly, while Mac fines and Indian fines saw an inventory buildup at Chinese ports, a separate note from Shanghai Metals Market said.
Tightening supply from state-run iron ore buyer China Mineral Resources Group's (CMRG) buying restrictions is expected to lend positive support to iron ore fundamentals in the short term, it added.
Meanwhile, incoming BHP BHP.AX CEO Brandon Craig said on Wednesday that negotiations with China will continue, amid CMRG's ban on the world's top miner's products to rein in prices.
Other steelmaking ingredients on the DCE languished, with coking coal DJMcv1 and coke DCJcv1 down 0.94% and 0.78%, respectively.
Steel benchmarks on the Shanghai Futures Exchange retreated. Rebar SRBcv1 shed 0.19%, hot-rolled coil SHHCcv1 was little changed, wire rod SWRcv1 lost 0.36% and stainless steel SHSScv1 softened 0.95%.
($1 = 6.8813 yuan)
(Reporting by Ruth Chai; Editing by Harikrishnan Nair)
((ruth.chai@thomsonreuters.com;))