China’s Iron ore futures edged higher on Thursday, bouncing back from the previous session’s pullback, as market participants remained worried about the dwindling supply of the steel-making feedstock at the country’s major ports.
The most-traded iron ore for September delivery on the Dalian Commodity Exchange rose as much as 1.1% to 749.50 yuan ($108.45) a tonne, and was up 0.7 as of 0222 GMT.
Iron ore supply at major trading ports in China such as Rizhao and Qingdao were “running at critical levels”, said Darren Toh, a data scientist with Singapore-based steel and iron ore data analytics company Tivlon Technologies.
“The drawdown on a week by week basis intensified over the last nine weeks,” he said.
With seaborne arrivals limited while domestic demand remained brisk, iron ore stockpiles at Chinese ports have fallen to the lowest in more than two years, based on data compiled by SteelHome consultancy.
Spot 62% iron ore grade for delivery to China hovered near a five-year high at $106 a tonne on Wednesday, according to SteelHome.
Tivlon believes the worst is yet to come as the current tightness in supply is a result mainly of the continued drawdown from ports as steel makers ramped up production.
“What we are seeing right now is only the ramp-up in sintering operations,” Toh said, adding that the full impact of the disruption in supply from Brazil was yet to be seen.
China’s iron ore imports in April fell to the lowest level in 18 months as poor weather in Brazil, the country’s second-biggest supplier, disrupted shipments and some production by miner Vale SA was halted following a mine accident.
For the first four months of 2019, China – the world’s biggest steel producer – imported 340.21 million tonnes of iron ore, down 3.7% from 353.32 million tonnes in the same period last year.
Dalian iron ore fell on Wednesday, slipping from record highs hit in the past few sessions, after the DCE announced increases in transaction fees for some futures contracts, which were scheduled to take effect on Thursday.
Analysts say the higher fees are aimed at curbing speculative trading. Last week the DCE asked its members to trade “rationally” after noting large fluctuations in the futures prices of iron ore and coke.
Futures prices of other steel-making raw materials rose as well, with Dalian coking coal up as much as 2.1% to 1,412 yuan a tonne, after two days of declines.
Coke jumped as much as 1.3% to 2,249 yuan a tonne.
The most-active construction steel rebar contract on the Shanghai Futures Exchange was up as much as 0.4% at 3,835 yuan a tonne. Hot rolled coil, used in cars and home appliances, edged up 0.8% to 3,689 yuan.