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Iron ore extended gains for a second consecutive session on Thursday due to growing appetite for the fundamentally healthy steelmaking ingredient, although the momentum slowed on the risk of demand easing in top consumer China.
The most-traded January iron ore on China’s Dalian Commodity Exchange (DCE) ended daytime trading 1.59% higher to 926.5 yuan ($126.59) a metric ton, the highest since March 15, following a rise of 2.51% a day before.
The corresponding open interest, which measures the number of contracts outstanding, climbed to the highest since Feb. 21 to 933,792 lots.
The benchmark December iron ore on the Singapore Exchange was 0.84% higher at $122.5 a ton, as of 0716 GMT, the highest since Sept. 18.
Low inventories, remaining solid demand, wide difference between spot and futures prices as well as improved sentiment from China’s stimulus policy continued to support prices of the key steelmaking ingredient, according to analysts.
However, the risk of demand weakening from possible production controls because of worsening air conditions in northern China loomed.
“The air quality in Tangshan has recently worsened, unveiling a possibility of a wave of sintering curbs, which will dent demand for raw materials,” analysts at Galaxy Futures said in a note.
The daily average hot metal output among mills surveyed, at 2.43 million tons as of Oct. 27, could possibly fall by around 70,000 tons in November due to growing pressure of thinning margins, analysts at consultancy Mysteel said in a note.
Other steelmaking ingredients weakened, with coking coal DJMcv1 and coke DCJcv1 on the DCE down 0.47% and 0.8%, respectively.
Steel benchmarks on the Shanghai Futures Exchange moved marginally on mixed signals.
Rebar SRBcv1 ticked up 0.37%, hot-rolled coil SHHCcv1 was little changed, wire rod SWRcv1 shed 0.25% and stainless steel SHSScv1 added 0.31%.