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Iron ore bounces from sharp fall as China demand worries ease

Iron ore futures rose on Friday, with Singapore’s benchmark contract rebounding after a five-session selloff, as a recovery in steel margins in China eased concerns over weak demand for the steelmaking ingredient.

Iron ore, however, was set for weekly losses amid worries about China’s ailing property sector, COVID-19 curbs, steel production cuts, and Sino-U.S. tensions over Taiwan.

Iron ore’s front-month September contract on the Singapore Exchange SZZFU2 was up 3.6% at $109.55 a tonne, as of 0700 GMT, after touching its weakest since July 25 at $104.70 on Thursday.
On China’s Dalian Commodity Exchange, the most-traded January 2023 contract DCIOF3 ended daytime trade 2.6% higher at 723 yuan ($107.18) a tonne.

“Fundamentals have improved marginally,” Zhongzhou Futures analysts said in a note, citing a rebound in steel margins that has prompted the restart of some of the idled blast furnaces in top steel producer China.

However, several such facilities remain shut, while those already restarted were not operating at full capacity as the recovery in Chinese steel demand remains slow.

The limited production has resulted in a steady decline in Chinese steel inventories.

Steel stocks held by traders in 132 Chinese cities surveyed by Mysteel consultancy dropped 603,700 tonnes from last week to a six-month low of 20.3 million tonnes, as of Aug. 4.

Inventories at 184 Chinese steel mills declined for the sixth week during July 28-August 3, to 4.76 million tonnes, Mysteel reported.

“Daily steel production in China dropped 10% in late-July from a year ago and is below the seasonal average for the first time since February,” Westpac analysts said in a note.

Rebar on the Shanghai Futures Exchange SRBcv1 rose 0.2%, hot-rolled coil SHHCcv1 climbed 0.3%, and stainless steel SHSScv1 gained 0.1%.

Dalian coking coal DJMcv1 fell 4%, while coke DCJcv1 slumped 2.6%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; editing by Uttaresh.V)

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