Iron ore extends gains on expectations of growing China demand

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Iron ore futures rose for a second straight session on Thursday, underpinned by heightened expectations of growing demand in top consumer China on the back of improved downstream demand and steel margins.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trade 3.07% higher at 874 yuan ($120.75) a metric ton, refreshing a more than one-month high achieved on Wednesday with a rise of more than 4%.

The benchmark May iron ore SZZFK4 on the Singapore Exchange was 0.52% higher at $116.45 a ton as of 0718 GMT, the highest since Mar. 8, following an increase of more than 5% a day before.

Driver for this round of price rally is a quicker-than-expected destock of construction steel products… and this also lifted expectations of production restarts and replenishment of raw materials among steelmakers,” analysts at Jinrui Futures said in a note.

“Steel demand will increase further with the accelerated pace of special bond issuance and further progress of the equipment upgrade in the second quarter.”

Some mills have started stockpiling cargoes for consumption needs over the upcoming May Day holiday break.

Transaction volumes of iron ore cargoes at ports surveyed climbed 24.6% from Tuesday to 1.15 million tons on Wednesday, data from consultancy Mysteel showed.

News that China’s state planner said it would promote all new issued debt-funded projects to commence construction by the end of June also supported prices.

Other steelmaking ingredients on the DCE advanced further, with coking coal DJMcv1 and coke DCJcv1 up 2.17% and 2.02%, respectively.

Steel benchmarks on the Shanghai Futures Exchange were higher. Rebar SRBcv1 added 1.18%, hot-rolled coil SHHCcv1 rose 1.16%, wire rod SWRcv1 gained 1.42% and stainless steel SHSScv1 advanced 1.59%.

The strength came despite U.S. President Joe Biden calling for sharply higher tariffs on Chinese metal products on Wednesday, proposing to raise the tariff to 25% for certain Chinese steel products.

“The impact is likely to be minimal, with Chinese steel making up only 1% of America’s domestic consumption,” analysts at ANZ bank said in a note.

Source: Reuters