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Dalian and Singapore iron ore futures reversed course to trade higher on Thursday afternoon, as data showing higher steel output lifted sentiment.
Prices had fallen in the morning due to caution around a slowdown in China’s consumer inflation in February, and a contraction in transaction volumes of construction steel products the previous day.
Output of five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil, and medium plate grew by 49,000 tonnes from the previous week, to around 9.52 million tonnes as of March 9, data from consultancy Mysteel showed.
The most-traded May iron ore futures contract on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 0.6% higher at 916.5 yuan ($131.45)a tonne.
On the Singapore Exchange, the benchmark April iron ore SZZFJ3 was at $126.95 a tonne as of 0752 GMT, up 0.09%.
“The gains seen in the afternoon are mainly because sentiment improved on the better-than-expected increase in the apparent demand of rebar,” said a Beijing-based analyst who is not authorised to speak to the media.
Rebar on the Shanghai Futures Exchange SRBcv1 climbed 1.46% to 4,313 yuan a tonne, hot-rolled coil SHHCcv1 grew 1.36%, wire rod SWRcv1 rose 0.84%.
The strength echoed with views from some analysts and traders who remained optimistic about the recovery in the downstream demand in the near term, even in the face of losses in the morning session.
The downstream steel demand has been continuously recovering, lending persistent support to the ferrous market in the short run, said Yu Chen, a Shanghai-based senior iron ore analyst at Mysteel.
“We believe fundamentals (of the ferrous market) will be stable or in line with expectations in the short term. And the hot metal output will gradually peak in March,” said Yao Xinying, a Shanghai-based research director of the ferrous market at consultancy SMM.
Other steelmaking ingredients, including coking coal and coke, also regained some lost ground by recording smaller losses compared to the morning trade.
Coking coal DJMcv1 edged down 0.63% and coke DCJcv1 fell 0.6%.