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Dalian iron ore futures recorded their best day in two weeks on Thursday, supported by tight inventories and expectations of robust Chinese demand despite an uncertain outlook.
The most-traded May iron ore on China’s Dalian Commodity Exchange (DCE) DCIOcv1 rose 3.5% to 948.5 yuan ($132.77) per metric ton at closing.
On the Singapore Exchange, the benchmark January iron ore SZZFF4 was up 2.3% at $133.91 a metric ton, snapping a three-day losing streak.
China’s state-backed DCE on Wednesday set a limit on daily trading volumes for iron ore futures at no more than 500 lots on contracts for January to May 2024 delivery.
The rebound in iron ore prices comes amid lower output from various steel mills.
“Domestic mills continue to reduce output amid falling profit margins, rising raw material costs, and uncertain demand outlook,” analysts at ING said in a report.
Steel demand in India, the world’s second-largest crude steel producer, will likely slow in the next financial year beginning March as a mammoth general election will delay government projects and infrastructure spending, analysts and industry executives said.
In China, however, analysts foresee a temporary rise in demand as mills look to replenish raw materials, ensuring sustained production during the Lunar New Year holiday break in February.
Additionally, sentiment was boosted on news that Chinese property developer Longfor Group paid a loan to a creditor in advance on Wednesday, according to a report.
Steel benchmarks on the Shanghai Futures Exchange were mixed. The most-active rebar contract SRBcv1 was up 1.3%, hot-rolled coil SHHCcv1 strengthened 1.2%, and stainless steel SHSScv1 rose 0.7%. Meanwhile, wire rod SWRcv1 was down 0.3%.
Other steelmaking ingredients Dalian coking coal DJMcv1 and coke DCJcv1 were up 2.7% and 0.4% respectively.