MANILA: Iron ore futures extended gains on Monday, with the benchmark Dalian contract seeing its biggest monthly rise since May, as upbeat economic indicators in top steel producer China helped sustain a buying momentum for the steelmaking ingredient.
China's factory activity expanded at the fastest pace in more than three years in November, keeping the world's second-largest economy on track to fully recover from the coronavirus crisis.
Iron ore on China's Dalian Commodity Exchange ended daytime trading up 1.1% at 911.50 yuan ($138.36) a tonne, after hitting a high of 919 yuan earlier in the session. The contract gained 15.3% this month. Iron ore on the Singapore Exchange climbed 1.4% as of 0727 GMT.
Spot iron ore prices have also soared, with the benchmark 62% iron-content material scaling the highest level since January 2014 at $130.50 a tonne on Friday, according to SteelHome consultancy.
"Benefiting from the rapid recovery of the national economy that stimulated demand... the overall performance of the national steel industry this year (has been) better than expected," Sinosteel Futures analysts said in a note.
Citing comments by Luo Tiejun, vice chairman of the China Iron and Steel Association, Sinosteel analysts said a series of tax- and fee-reduction measures by the government also helped boost business activity.
However, they said a pullback in prices should be expected in the coming weeks as the weather turns colder in China, which normally prompts a slowdown in construction activity.
The market's optimism over demand prospects is also likely to be tempered by the resurgence of COVID-19 cases globally, analysts said. Rebar on the Shanghai Futures Exchange slipped 0.6%, while hot-rolled coil gained 1.1% and stainless steel was flat.
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