Iron ore prices rose on Thursday, with the Dalian benchmark advancing for a fourth straight session, buoyed by hopes of a pick-up in steel demand in top consumer China and improving steel profit margins.
The most-traded iron ore for January delivery on China’s Dalian Commodity Exchange ended daytime trading 0.7% higher at 816 yuan ($125.89) a tonne.
The steelmaking ingredient’s most-active October contract on the Singapore Exchange was up 2.7% at $152 a tonne, as of 0710 GMT.
The pullback of iron ore prices from record peaks scaled in May helped boost steel margins, which may have prompted Chinese mills to increase their production.
Daily crude steel production during Aug. 11-20 averaged 2.14 million tonnes, up 4.6% compared with the average volume in the first 10 days of the month, analysts said, citing a report from the China Iron & Steel Association.
Spot iron ore has fallen below $150 a tonne from a record peak above $230 in May, as Chinese demand had collapsed, partly due to the country’s ongoing steel production controls https://www.reuters.com/world/china/green-push-dilemma-chinas-steel-curbs-could-cripple-price-control-efforts-2021-08-17.
But optimism around Chinese steel demand is providing some support to steel and iron ore prices.
“An acceleration in local government bonds (issuance) is also stoking hopes of stronger steel demand in coming months,” said ANZ senior commodity strategist Daniel Hynes, citing the more than 600 billion yuan worth of notes sold since last week by local authorities.
He said the proceeds from these bond sales are typically used to fund infrastructure projects.
Still, Hynes said “the headwinds are still strong for the steel and iron ore market”.
Construction steel rebar on the Shanghai Futures Exchange shed 2.5%, while hot-rolled coil slumped 3.4%. Stainless steel slipped 0.9%.
Dalian coking coal dropped 0.3% and coke lost 0.9%, both retreating from record highs.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila, Editing by Sherry Jacob-Phillips)
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