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China iron ore futures hit 2-week high on steel demand outlook

Iron ore futures rose on Wednesday, bolstered by expectations of a further pickup in steel output and demand in China against the backdrop of an improving outlook for global economic activity.

Benchmark iron ore on China’s Dalian Commodity Exchange closed up 1.1% at 854.50 yuan ($125.21) a tonne, rising for a fifth straight session. Its settlement price of 850 yuan was the highest since Aug. 20.

The steelmaking ingredient’s benchmark price on the Singapore Exchange rose 1.3% to $121.10 a tonne in afternoon trade.

Iron ore prices in China, which accounts for more than half of the world’s steel output, have soared past $100 a tonne since late-May, hitting multi-year peaks last month on strong domestic demand fuelled mainly by a stimulus-driven construction boom.

Spot prices hovered near 6-1/2-year highs, with the benchmark 62% material at $126 a tonne on Tuesday, SteelHome consultancy data showed.

“Prices above $120 look toppish to me, but it is difficult to be bearish in this climate,” said Howie Lee, economist at OCBC Bank in Singapore. “Any technical correction is likely to be shallow and iron ore is likely to find strong support above $100.”

FUNDAMENTALS

* Factories across Europe, Asia and North America continued to shake off the coronavirus gloom in August, boosting hopes for a pickup in global economic activity towards the end of the year.

* Chinese steel prices may rise further this month, with reconstruction works after recent heavy rainfalls and flooding and newly-launched construction projects likely to boost rebar demand in particular, Mysteel consultancy reported.

* Rebar on the Shanghai Futures Exchange gained 0.1%, while hot-rolled coil and stainless steel closed virtually flat.

* Vehicle sales in China were expected to hit 2.18 million units in August, up 11.3% year-on-year, an industry group said.

* Coking coal jumped 1.9% and coke advanced 1.7%.
Source: Reuters (Reporting by Enrico dela Cruz; editing by Uttaresh.V and Subhranshu Sahu)

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