Iron ore futures in Asia rose on Friday, but were set for a third weekly decline on persistent price-control concerns.
Top steel producer China’s recent statements on steel capacity reforms had sparked worries about tight supply prospects, pushing prices to record highs earlier this month.
Surging prices had led to strong margins, encouraging steel producers to ramp up output and their purchases of iron ore.
On China’s Dalian Commodity Exchange DCIOcv1 iron ore for September delivery ended daytime trading 4.1% higher at 1,063 yuan ($166.79) a tonne. The most-traded contract, however, has fallen more than 5% so far this week.
On the Singapore Exchange SZZFM1, June iron ore was up 1.1% at $185 a tonne by 0709 GMT.
Commodities markets have seen a marked increase in volatility since Chinese Premier Li Keqiang’s reiteration of the importance of controlling overheated prices at a recent cabinet meeting, JP Morgan analysts said in a note.
“The government’s track record in fighting high commodity prices has had mixed results, especially when supply is limited by tight environmental controls,” they said.
Steel prices are likely to soften in the current quarter as demand slows, but may pick up in the third quarter “as the structural demand growth story remains intact on healthy property and (fixed asset investment) data”, JP Morgan said.
Benchmark 62% iron ore’s spot price, which touched a record $232.50 a tonne on May 12, fell and traded at $191.50 on Thursday, SteelHome consultancy data showed.
Steel for October deliveries rose, with construction material rebar on the Shanghai Futures Exchange SRBcv1 up 4.1%, while hot-rolled coil climbed 4.9%.
Stainless steel gained 3.5%.
Dalian coking coal DJMcv1 advanced 2.2% and coke DCJcv1 jumped 2.5%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Ramakrishnan M. and Alexander Smith)
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