Dalian iron ore rises but caution grows over China demand recovery


Dalian iron ore futures prices rose for a third straight session on Wednesday, aided by expectations that construction activity is picking up in top consumer China, but gains were capped by investor caution over the scale of the demand recovery.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) ended daytime trade 1.43% higher at 813.5 yuan ($112.48) a metric ton, after climbing more than 5% on Tuesday.

Iron ore fundamentals have showed marginal improvement,” analysts at Shengda Futures said in a note, adding they expect the average daily hot metal output, an indicator to monitor ore demand, to exceed 2.3 million tons by the end of April.

Overseas ore shipments may slow down in the near term after miners started maintenance following efforts to catch up with quarterly targets. But it’s still too early to say a turnaround has come,” they said.

Analysts at Soochow Futures also pointed out improved ore demand outlook after hot metal output touched the bottom, but cautioned a further ore price rise may face some pressure as it’s hard to tell by how much hot metal output will grow.

The benchmark May iron ore SZZFK4 on the Singapore Exchange was, however, 0.74% lower at $106.7 a ton, as of 0912 GMT, after rising more than 3% in the previous session.

Other steelmaking ingredients on the DCE also advanced further, with coking coal DJMcv1 and coke DCJcv1 both up 1.62%.

Steel benchmarks on the Shanghai Futures Exchange were rangebound. Rebar SRBcv1 edged up 0.36%, hot-rolled coil SHHCcv1 edged down 0.21%, wire rod SWRcv1 shed 0.72% and stainless steel SHSScv1 added 0.91%.

“Construction steel consumption may improve in the second quarter when the issuance of special bonds will likely accelerate compared to the first quarter,” analysts at Chaos Ternary Futures said in a note.

Special bonds are typically used to fund infrastructure projects.

Source: Reuters