MANILA: Iron ore futures extended gains on Wednesday, with prices in China surging more than 5%, as optimism grew over demand prospects driven partly by supportive policy measures in the world’ top steel producer.
The lack of clear and fresh directives from Chinese authorities for steel mills to curb production and limit this year’s output at 2022 levels, as well as reduced scrap steel supply and low investories also underpinned prices of the steelmaking ingredient.
The most-traded January iron ore on China’s Dalian Commodity Exchange ended morning trade 3.6% higher at 816.50 yuan ($112.09) per metric ton, advancing for a tenth straight session and climbing as much as 5.6% earlier.
On the Singapore Exchange, iron ore’s benchmark September contract rose as much as 2.9% to hit $113.90 per metric ton, its highest since July 26. Prices of other steelmaking ingredients also advanced, with coking coal and coke on the Dalian exchange gaining 4.7% and 3.4%, respectively.
China’s continued policy support for its sputtering economy and current demand and supply fundamentals fuelled the broad-based ferrous market rally, analysts said.
“The market is also buoyed by the absence of government directives to cut steel production,” ANZ commodity strategists said in a note.
China produced 626.51 million tons of crude steel in January-July, up 2.5% from the same period the year before. The expectation previously was that Beijing would continue to cap steel output this year to limit carbon emissions. “Affected by the reduction in scrap steel supply, iron ore supply and demand continue to be tight, and the inventory at various links is at a low level,” Huatai Futures analysts said in a note.
Steel benchmarks on the Shanghai Futures Exchange were also firmer, with rebar up by 1.4%, hot-rolled coil by 1.8%, and wire rod by 2.4%. Stainless steel was steady.
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