Iron ore futures extended gains on Wednesday, with prices in China surging more than 5%, as optimism grew about demand prospects in the world’s top steel producer driven partly by supportive policy measures.
A lack of clear and fresh directives from Chinese authorities for steel mills to curb production and limit this year’s output at 2022 levels, as well as reduced scrap steel supply and low inventories, also underpinned prices of the steelmaking ingredient.
The most-traded January iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 3.7% higher at 817 yuan ($112.13) per metric ton, stretching its gains in a 10-session rally to about 14%. It climbed 5.6% earlier in the day.
On the Singapore Exchange, iron ore’s benchmark September contract SZZFU3 was up 2.1% at $112.95 per ton, as of 0712 GMT, after hitting $113.90, its highest since July 26.
Other steelmaking ingredients also advanced, with coking coal DJMcv1 and coke DCJcv1 on the Dalian exchange gaining 4.1% and 2.9%, respectively.
China’s continued policy support for its sputtering economy and current demand and supply fundamentals fuelled the broad-based ferrous market rally, analysts said.
“The market is also buoyed by the absence of government directives to cut steel production,” ANZ commodity strategists said in a note.
China produced 626.51 million tons of crude steel in January-July, up 2.5% from the same period the year before. The earlier expectation was that Beijing would continue to cap steel output this year to limit carbon emissions.
“Affected by the reduction in scrap steel supply, iron ore supply and demand continue to be tight, and the inventory at various links is at a low level,” Huatai Futures analysts said in a note.
Steel benchmarks in Shanghai were also firmer, with rebar SRBcv1 up by 1%, hot-rolled coil SHHCcv1 by 1.2%, and wire rod SWRcv1 by 2.5%. Stainless steel SHSScv1 shed 0.2%.