China iron ore futures rise on post-Lunar New Year demand optimism
China’s iron ore futures vaulted to a one-week high on Friday, buoyed by expectations of improved demand for the steelmaking raw material after the Lunar New Year holiday.
Iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 4.2% higher at 1,004.50 yuan ($155.16) a tonne, after earlier hitting a one-week high of 1,017 yuan.
It has gained 1.4% this week, after three consecutive weekly losses.
Spot iron ore jumped to $157 a tonne on Thursday, from $150 the day before, SteelHome consultancy data showed. SH-CCN-IRNOR62
Weekly Chinese steel inventory data released on Thursday to “select” institutional clients showed the growth in warehouse stocks had far outpaced those held by steel producers, said Atilla Widnell, managing director at Navigate Commodities in Singapore.
“Traders of the DCE and SGX-listed iron ore futures contract perceived this data to be bullish for underlying physical demand,” he said.
“It suggests COVID-19 afflicted steel supply chains are returning to normal and local blast furnaces may soon start to lift capacity utilization rates to meet stimulus-fuelled steel demand for 2021.”
Asian iron ore markets are likely to be quiet in the next two weeks, with physical and derivatives traders expected to be away during top steel producer China’s week-long Lunar New Year holiday from Feb. 11.
After the holiday, Widnell said “leading indicators will be the pace at which warehouses restock steel, rebounding blast furnace capacity utilization rates, and slower arrivals of Australian and Brazilian iron ore – all of which should be price supportive”.
Iron ore fell 0.4% in volatile trading on the Singapore Exchange SZZFH1 by 0715 GMT, as concerns emerged over China’s ongoing COVID-19 controls, which may delay construction workers’ return from their holiday.
Coking coal DJMcv1 jumped 2.5% while coke DCJcv1 climbed 1.7%.
Rebar on the Shanghai Futures Exchange gained 1.6%, hot-rolled coil added 2%, and stainless steel rose 0.2%.