Iron ore futures strengthened on Monday as brighter demand for the key steelmaking ingredient in top consumer China outweighed worries of steel production cuts.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) closed up 2.43% to 779.5 yuan ($107.45) a metric ton.
The benchmark April iron ore (SZZFJ5) on the Singapore Exchange advanced 2.29% to $102.2 a ton.
“Production among China’s independent electric-arc-furnace (EAF) steel producers increased further this week in response to the continuous recovery of domestic steel demand,” Mysteel, a consultancy, said.
The average capacity utilisation rate for EAF mills rose for the sixth straight week to 54.9% on Friday, the highest since June 2024, data from Mysteel showed.
Hot metal production, typically used to gauge iron ore demand, increased significantly month-on-month, while manufacturing steel demand remained high, broker Galaxy Futures said.
Meanwhile, Chinese Premier Li Qiang, at a business forum on Sunday, urged countries to open their markets to combat “rising instability and uncertainty”, as China braces for further U.S. tariffs.
“Steel production faces increasing headwinds from tariffs and capacity cuts,” said ANZ analysts in a note.
Beijing is mulling setting up related funds to build a compensation system to eliminate outdated steel capacity, Qian Gang, chairman of CITIC Pacific Special Steel 000708, said on Friday.
At its annual parliamentary meeting earlier this month, China said it would restructure its giant steel industry through output cuts, but did not announce any targets.
Still, iron ore imports may remain resilient due to seasonal restocking, ANZ added.
Other steelmaking ingredients on the DCE gained, with coking coal adding 1.13% and coke (DCJcv1) rising 2.97%.
Most steel benchmarks on the Shanghai Futures Exchange rose. Rebar advanced 1.23%, hot-rolled coil added nearly 1.3%, wire rod (SWRcv1) gained 1.44%, while stainless steel fell 0.15%.
Source: Reuters