Iron ore futures prices rebounded on Tuesday, but were off their session high as investors booked profits following market talks of controlling steel output in the southern province of Fujian in top consumer China.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) gave up earlier gains to end daytime trade 0.24% higher at 820.5 yuan ($113.08) a metric ton.
They had hit an intra-day high at 840 yuan a ton earlier, rebounding from a drop in the previous session.
The benchmark July iron ore SZZFN4 on the Singapore Exchange jumped 1.09% to $106.35 a ton, as of 0732 GMT.
Talks circulated that authorities in Fujian met with local steelmakers on Monday to discuss details about output restrictions this year, requiring local state-run manufacturers not to exceed 85% of approved steel capacity before the meeting.
The provincial department of industry and information technology did not immediately respond to a Reuters fax requesting comment.
Crude steel output in Fujian province climbed by 6.5% year-on-year to approximately 34.06 million tons in 2023, accounting for 3.3% of the country’s total, data from the National Bureau of Statistics showed.
“The news of crude steel control had already been priced in, so some traders closed certain short positions following the latest talks,” said a north China-based trader, requesting anonymity as he is not authorised to speak to media.
“A significant fall in iron ore prices may need an obvious reduction in hot metal output.”
Hot metal is a blast furnace product and a key indicator of ore demand.
“Fujian is not a big steel producer and we are looking at how much exactly hot metal output will be cut,” said a Singapore-based trader.
While higher-than-expected output underpinned prices last Friday, analysts at Huatai Futures believe room for a further increase will be limited amid a seasonally slack steel demand.
Other steelmaking ingredients on the DCE lost ground, with coking coal DJMcv1 and coke DCJcv1 down 1.04% and 0.96%, respectively.
Steel benchmarks on the Shanghai Futures Exchange were mixed. Rebar SRBcv1 was flat, hot-rolled coil SHHCcv1 rose 0.24%, wire rod SWRcv1 edged up 0.36% while stainless steel SHSScv1 lost 0.22%.
Source: Reuters (Reporting by Amy Lv and Mei Mei Chu; Editing by Sohini Goswami and Savio D’Souza)
