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Dalian iron ore extends rally on improved steel margins, low inventory

Dalian iron ore futures extended gains for a fourth session in a row on Thursday, supported by improved steel margins, production resuming and the persistently low inventory at Chinese steel mills.

A survey of 114 mills showed the inventory of imported sintered ore fell for a third consecutive week, including a near 1% week-on-week decline to 24.19 million tonnes as of May 18, according to consultancy Mysteel.

That brings the total decline in inventories since late April to 7.6%, according to Reuters calculation based on Mysteel data.

A few mills in North China’s Shanxi province had restarted operations of blast furnaces that had been suspended earlier, consultancy Shanghai Metals Market (SMM) said in a report.

The blast furnace capacity utilization rate among surveyed mills climbed to 94.05% as of May 17, from 93.73% in the previous week, SMM data showed.

The most-traded September iron ore on the Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trading 1.91% higher at 746.5 yuan ($108.00) a tonne, the highest since April 20.

“The destocking (of steel products) among steel mills has accelerated since May and the improved margins encouraged mills to build up positions for raw materials, lending support for prices,” analysts at Huatai Futures said in a note.

However, the benchmark June iron ore SZZFM3 on the Singapore Exchange was 0.73% lower at $107.35 a tonne, as of 0806 GMT, after climbing to an over three-week high of $108.14 on Wednesday.

The price divergence between the Dalian and Singapore benchmarks is mainly due to the adjustment of valuation, two analysts said.

As for other steelmaking ingredients, coking coal DJMcv1 ticked up by 0.21% and coke DCJcv1 rose 0.63%.

Rebar on the Shanghai Futures Exchange SRBcv1 climbed 0.3%, hot-rolled coil SHHCcv1 increased by 0.53%, wire rod SWRcv1 lifted 0.58% and stainless steel SHSScv1 advanced 0.3%.

“Rebounding raw materials provided some cost support to steel prices,” Huatai analysts added.

Gains broadly narrowed in the afternoon trading session on shrinking apparent steel demand, according to analysts.

Source: Reuters

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