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Iron ore extends gains on supply concerns, China demand

Dalian iron ore hit a two-week high on Tuesday as trading resumed in top steel producer China after a three-day holiday weekend, with supply concerns and signs of stronger demand supporting prices.

The most-traded January iron ore on China’s Dalian Commodity Exchange ended daytime trade 2% higher at 728.50 yuan ($105.23) a tonne, after touching its highest since Aug. 29 at 732 yuan earlier in the session.
On the Singapore Exchange, the steelmaking ingredient’s benchmark October contract rose 1.9% to $104.05 a tonne, as of 0700 GMT, near Monday’s two-week peak of $104.55.

“Iron ore arrivals at Chinese ports declined 2.32 million tonnes last week, and when combined with a continuation of robust daily port offtakes, should result in a material draw in portside inventories,” said Navigate Commodities Managing Director Atilla Widnell.

Iron ore shipments from Australia and Brazil declined 1.52 million tonnes over the same period, tightening the near-term balance, he added.

China’s iron ore portside inventory declined for the first time in 11 weeks to 142.1 million tonnes, as of Sept. 9, SteelHome consultancy data showed.

The blast furnace capacity utilisation rate among 247 Chinese steel mills regularly surveyed by Mysteel consultancy increased to 87.56% over Sept. 2-8, rising for the sixth straight week.

Other steelmaking inputs also rose, with Dalian coking coal and coke climbing 5% and 3.3%, respectively.

Intensified government support for China’s ailing property sector and its COVID-ravaged economy also buoyed market sentiment.

On the Shanghai Futures Exchange, rebar SRBcv1 and hot-rolled coil climbed 1% and 1.2%, respectively. Stainless steel gained 3.9%.

But China’s strict COVID rules could dampen the mood.

“The litmus test will be … whether construction activity benefits from the seasonal demand peaks of ‘Golden September, Silver October’, given the recent frequency of COVID lockdowns,” Widnell said, referring to China’s peak construction months.

Source: Reuters

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