Dalian iron ore futures extended gains after a week-long Lunar New year holiday in China, climbing more than 3% to a contract high on Monday, on optimism around demand prospects for the world’s top steel producer.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange ended daytime trade 2% higher at 873.50 yuan ($129.40) a tonne, after earlier hitting a contract-high 890 yuan.

On the Singapore Exchange, the steelmaking ingredient’s benchmark March contract was up 1.1% at $127.80 a tonne, as of 0714 GMT, easing from a session-high of $130.55.

“We will need to wait and see if the reopening rally maintains the verve with which it entered the holiday period or whether this optimism is now running on fumes,” said Navigate Commodities Managing Director Atilla Widnell.

Overall market sentiment was positive, as traders cheered data showing Lunar New Year holiday trips inside China surged 74% from last year after authorities scrapped COVID-19 travel curbs.

Adding to upbeat mood, the central bank said on Sunday it would roll over three lending tools to increase support for targeted sectors of the economy.

Rebar and hot-rolled coil on the Shanghai Futures Exchange both rose 0.6%, while wire rod climbed 1.3%. Stainless steel slipped 0.1%.

Dalian coking coal dipped 1.4%, while coke gained 0.4%.

In the spot market, benchmark 62%-grade iron ore was trading at $128.50 a tonne, the highest since June, based on SteelHome consultancy data.

Australia’s Fortescue Metals Group said on Friday it was expecting a solid economic rebound in top iron ore buyer China.

But worries about regulatory intervention as China has warned against price speculation may curb gains.

China “will become more vigorous and vocal in its narrative on what it considers to be overvalued iron ore prices – if they continue to rise,” Widnell said.

Source: Reuters