Prices of iron ore futures rose for a third straight session on Thursday to hit multi-week highs, helped by hopes of improving China demand.
Rising steel stocks, however, fuelled concerns over the pace of steel production resumption, capping gains.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trade 1.67% higher at 791.5 yuan ($110.65) a metric ton, hitting the highest level since August 14.
The benchmark October iron ore on the Singapore Exchange climbed 1.66% to $104.95 a ton by 0800 GMT. It touched the highest level since July 24 at $105.35 earlier in the day.
Some steelmakers planned to resume production on Thursday and increase procurement of raw materials, Yingguang Wang, an analyst at consultancy Lange Steel, said in a note a day before.
Steel mills in top Chinese steelmaking hub Tangshan were required to restrict production to ensure better air quality for a military parade in Beijing on September 3 to commemorate the end of World War Two, weakening ore demand temporarily.
“A lot of money flowed out of stock markets today to buy iron ore,” said a Singapore-based trader, requesting anonymity as he is not authorised to speak to media.
“But I am planning to build some short positions as I am not that optimistic,” he said.
Chinese stocks tumbled as investors booked profit on surging tech shares after reports of possible regulatory curbs on speculation.
Rising steel stocks and lacklustre demand may stop mills from quickly resuming production, which could dent appetite for feedstocks, and thus curb price gains.
Keeping price gains in check was expectation of portside stocks piling up, analysts at broker Yongan Futures said.
Coking coal and coke, other steelmaking ingredients, fell 1.97% and 1.37%, respectively.
Steel benchmarks on the Shanghai Futures Exchange were mixed. Rebar was little changed, hot-rolled coil nudged up 0.24%, wire rod (SWRcv1) climbed 0.34%, while stainless steel shed 0.58%.
Source: Reuters