BEIJING: Iron ore futures recovered on Friday, boosted by better-than-expected inflation data out of top consumer China, although lingering worries around demand and high supply kept prices on track for a weekly loss.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) gave up some earlier gains to end daytime trade 0.27% higher at 741.5 yuan ($103.43) a metric ton, posting a week-on-week fall of 2.6%.
The benchmark September iron ore on the Singapore Exchange climbed 1.05% to $101 a ton, as of 0709 GMT, but was down 2.7% so far this week. China’s consumer prices rose at a faster-than-expected rate in July, official data showed, as Beijing ramped up support for its frail consumer sector in the face of a sputtering economic recovery, although producer price deflation persisted.
Also, a risk-on tone across broader financial markets helped push commodity markets higher, ANZ analysts said in a note. However, some analysts pointed out it’s far from a turnaround in fundamentals. “It might be a temporary rebound following sharp price slumps, but ore demand will continue to be capped by falling hot metal output,” said Chu Xinli, a Shanghai-based analyst at China Futures. Average daily hot meal output among steelmakers surveyed slid 2.1% week-on-week to about 2.32 million tons as of Aug. 9, the lowest since late April, data from consultancy Mysteel showed.
“So, we do not think the room for this round of price uptick is large. And, we expect prices to extend weakness in the coming week,” Chu added.
The essential driver for this downturn is the weak downstream steel demand, analysts at Jinrui Futures said in a note. Other steelmaking ingredients on the DCE retreated, with coking coal and coke down 0.32% and 1.03%, respectively.
Steel benchmarks on the Shanghai Futures Exchange erased earlier gains. Rebar lost 0.27%, hot-rolled coil dropped 0.72%, wire rod fell 1.39% and stainless steel dipped 0.32%.
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