Iron ore drifts down as China deflation persists

By Amy Lv and Lewis Jackson

BEIJING, June 9 (Reuters) - Iron ore futures prices slipped on Monday as weak data from top consumer China weighed on investor sentiment, although hopes of progress in trade talks between the world's two largest economies limited losses.

The most-traded September iron ore contract on China's Dalian Commodity Exchange (DCE) DCIOcv1 closed daytime trade 0.71% lower at 703 yuan ($97.83) a metric ton.

The benchmark July iron ore <SZZFN5> on the Singapore Exchange dropped 0.74% to $94.8 a ton, as of 0711 GMT.

China's producer deflation deepened to its worst level in almost two years in May while consumer prices extended declines, as the economy grappled with trade tensions and a prolonged housing downturn.

Three of U.S. President Donald Trump's top aides will meet with their Chinese counterparts in London on Monday for talks aimed at resolving a trade dispute between the two superpowers that has kept global markets on edge.

While both countries agreed on a 90-day trade truce on May 12 in Geneva, that temporary deal did not address broader concerns straining the bilateral relationship. The market is eager to see whether a final deal will be agreed, easing pressure on global economic growth.

Additionally, China's iron ore imports in May missed expectations, dropping 4.9% from April, as mills exercised caution in buying seaborne cargoes in anticipation of seasonally slower steel consumption.

The falling portside iron ore inventory and hot metal output levels - a gauge of iron ore demand - remaining high acted as a buffer, arresting a more significant price decline, said analysts.

Other steelmaking ingredients on the DCE were mixed, with coking coal DJMcv1 adding 0.13% and coke DCJcv1 down 1.22%.

Steel benchmarks on the Shanghai Futures Exchange were rangebound. Rebar SRBcv1 and hot-rolled coil SHHCcv1 were little changed, wire rod SWRcv1 shed 0.66% and stainless steel SHSScv1 ticked down 0.47%.

($1 = 7.1856 Chinese yuan)