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Iron ore futures snap five-day slump as China steel margins recover

Dalian and Singapore iron ore futures rebounded on Monday after a five-day slump, due to a recovery in steel margins in China, the world’s biggest buyer of the steelmaking ingredient.

The most-traded September iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 0.9% higher at 1,136.50 yuan ($175.22) a tonne.

Dalian iron ore marked its steepest weekly drop in 17 months on Friday due to worries about China’s steel production caps.

Iron ore’s most-active August contract on the Singapore Exchange was up 0.7% at $198.75 a tonne by 0703 GMT.

“Plunging iron ore costs and surging steel prices have resulted in a sharp recovery in steel margins, particularly for long products,” Atilla Widnell, managing director at Navigate Commodities in Singapore, said.

Construction steel rebar’s spot price in top steel producer China’s rose as more provinces requested mills to reduce production for the remainder of this year, sparking worries about supply.

Steel producers in Anhui, Gansu, Fujian, Jiangsu, Jiangxi, Shandong, and Yunnan have been told to limit their output to 2020 volumes amid China’s intensified efforts to curb carbon emissions.

Benchmark 62%-grade iron ore’s spot price in China traded at $205 a tonne on Friday, falling from $223 a week earlier amid a clouded demand outlook, SteelHome consultancy data showed.

“We’re fundamentally and technically bullish in the short term, with arrivals of iron ore cargoes landing in China expected to fall faster than domestic consumption over the past and coming week,” Widnell said.

Rebar and hot-rolled coil on the Shanghai Futures Exchange both gained 0.4%. Stainless steel SHSScv1 rose as much as 2.9% to record-high 19,755 yuan a tonne.

“There certainly isn’t sufficient supply availability from the seaborne market to feed Chinese steel consumption growth in the second half, particularly for long products,” Widnell said.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila, Editing by Sherry Jacob-Phillips and David Evans)

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