Iron ore rises as improved China steel margins lift mood
Dalian and Singapore iron ore futures rose on Monday, extending their gains as improved steelmakers’ margins in China encouraged mills to gradually restart idled blast furnaces and boost imports of the steelmaking ingredient.
Hopes that steel output curbs in top producer China to meet decarbonisation goals will be less strenuous in the second half of the year also supported iron ore prices.
Iron ore’s most-traded January 2023 contract on China’s Dalian Commodity Exchange DCIOcv1ended daytime trade 4.3% higher at 737.50 yuan ($109.06) a tonne. It touched its highest since Aug. 1 at 745.50 yuan earlier in the session.
On the Singapore Exchange, the front-month September contract SZZFU2 climbed by up to 3.6% to $113.05 a tonne, extending Friday’s rebound from a five-session slump.
China’s iron ore purchases in July rose 3.1% from a year earlier and 3% from June as steel margins and prices rebounded, and despite concerns over weak steel demand particularly from the country’s ailing property sector.
“It was surprising to see a month-on-month lift in China’s iron ore imports given the ongoing pressure facing China’s steel sector,” said Commonwealth Bank of Australia commodities analyst Vivek Dhar.
Shrinking steel stocks in China, partly because of its policy to curb annual output to limit emissions, are also prompting the resumption of blast furnace operations.
Despite such policy, Dhar believes “the extent that China’s steel sector needs to reduce output is less onerous than the same time in 2021”.
Rebar on the Shanghai Futures Exchange rose 2.8% SRBcv1, while hot-rolled coil SHHCcv1 climbed 2.7%.
“While still depressed compared with 2021 volumes… fragile construction steel consumption has also shown further signs of improvement,” said Navigate Commodities Managing Director Atilla Widnell.
Stainless steel SHSScv1 slumped 2.8%.
Dalian coking coal DJMcv1 advanced 2% and coke DCJcv1 gained 1.8%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila and Sonali Paul in Melbourne; Editing by Subhranshu Sahu and Louise Heavens)