Dalian iron ore cuts gains as Shanghai steel retreats


Chinese iron ore futures trimmed gains after racing to a fresh eight-month high on Thursday as Shanghai steel prices retreated, potentially stalling a rally in the steelmaking raw material.

Sharp gains in steel prices as producers looked to brisk seasonal demand in China from this month had fueled iron ore’s gains this year after losing 70 percent in the past three years.

At above $51 a tonne, spot iron ore has risen 20 percent to be the best performing commodity in 2016. Iron ore buying by Chinese steel mills is stable, a Shanghai-based trader said.

“We don’t see any rush to buy due to the price rally but demand is stable.” Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI climbed 2.4 percent to $51.60 a tonne on Wednesday, the highest since Oct. 21, according to The Steel Index (TSI) which assesses prices. Optimism towards steel prices and rising profitability at mills supported further gains in iron ore even as only few spot cargoes changed hands, said TSI.

The rally in the spot benchmark was unexpected for many analysts who had predicted that a persistent glut and slowing Chinese demand would continue to dog the steelmaking raw material.

“We don’t believe that this rally can be sustained, due to the weakness in market fundamentals,” analysts at National Australia Bank wrote in a report, attributing the price gains to short-term supply disruptions. On Thursday, the most-traded May iron ore on the Dalian Commodity Exchange was up 0.3 percent at 382.50 yuan ($58.45) a tonne by midday break, after peaking at 390.50 yuan earlier, its strongest since June 26. Iron ore futures in Singapore <0#SZZF:> dropped. Shanghai steel futures dipped after a recent rally.

Construction-used rebar on the Shanghai Futures Exchange fell 1 percent to 1,976 yuan a tonne, after touching a six-month high of 2,010 yuan on Tuesday.



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