China’s steel, iron ore resume gains on firm demand
China’s steel and iron ore futures closed higher on Thursday, resuming their climb after a one-day pause, supported by expectations that domestic demand will remain strong amid brisk construction activity in the world’s biggest steelmaker.
The most active rebar contract, with October 2019 expiry, on the Shanghai Futures Exchange climbed 1.4 percent to 3,808 yuan ($567.01) a tonne, the benchmark’s highest close since September 2011.
The most traded September 2019 iron ore contract on the Dalian Commodity Exchange gained 1.2 percent to close at 654.5 yuan a tonne.
The session’s gains, however, were muted compared with the recent upturn that brought iron ore prices to the highest since 2013 when China launched futures trading for the steelmaking feedstock.
“There’s not much news at the moment, but demand for iron ore is expected to continue rising, which should support prices,” a Shanghai-based trader said.
“I heard from some steel mills in northern China that they are increasing production. And, with the winter output restrictions having been lifted, we’ll see some more demand for iron ore in the near future,” the trader said.
As Chinese steel mills’ appetite for iron ore remains strong, worries persist about supply tightening as shipments from Brazil and Australia decline.
The global iron ore market is facing a deficit this year due to the anticipated reduced supply from the world’s No. 1 iron ore miner Vale SA, whose operations in Brazil have been curtailed following a fatal tailings dam collapse in January.
Adding to concerns about the shortfall, major iron ore producers in Australia have lowered their shipment estimates for this year, after a tropical cyclone in late March hit their operations.
Crude steel output in China, which accounts for half of the world’s total production, is expected to rise 3-4 percent this year, Nikkei Asian Review quoted iron ore miner Fortescue Metals Group’s CEO Elizabeth Gaines as saying.
Hot rolled coil inched up nearly 1 percent to 3,703 yuan a tonne.
Bucking the trend, coking coal dropped 0.9 percent to 1,312.5 yuan a tonne, while coke dipped 0.8 percent to 2,012 yuan, extending their losses as China aims to produce more coal and expects an oversupply of the fuel in the near term.
Source: Reuters (Reporting by Enrico dela Cruz; Editing by Richard Pullin and Sherry Jacob-Phillips)