Iron ore market unsettled by freight cost surge and falling demand

Iron ore prices wobbled on Tuesday, as investors weighed rising freight costs due to a widening Iran conflict, which is choking shipments via the crucial Strait of Hormuz, against falling demand amid production restrictions among Chinese steelmakers.

An Iranian Revolutionary Guards senior official said on Monday that the strait was closed and that Iran would fire on any ship trying to pass, Iranian media reported, sending oil prices and shipping costs rocketing higher.

The most traded iron ore contract on China's Dalian Commodity Exchange closed daytime trade up 0.67 per cent at CNY753.5 ($109.32) a tonne. The benchmark April iron ore on the Singapore Exchange was down 0.21 per cent at $99.05 a tonne, as of 07:34 GMT.

"Right now, we are seeing an increase in freight costs, which is affecting many markets," said Tomas Gutierrez, head of data at consultancy Kallanish Commodities. Rising freight costs raised costs for iron ore and therefore aided ore prices, said analysts.