Iron ore futures prices rebounded on Wednesday, as some investors closed their short positions to cash in profits, although anticipation of seasonally slower demand capped gains.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trade 1.37% higher at 704.5 yuan ($97.98) a metric ton, after hitting a nearly two-month low the day before.
The benchmark July iron ore (SZZFN5) on the Singapore Exchange was 0.95% higher at $95.2 a ton, as of 0757 GMT.
Prices have fallen dramatically in the past few days, leaving futures prices at a level lower than spot prices, which means limited downside room for futures in the near term, said Steven Yu, senior analyst at consultancy Mysteel.
“That has propelled some shorts to wind up their positions as hot metal output is likely to hover around 2.4 million tons in June; a more drastic price fall will only show up until fundamentals deteriorate further,” Yu added.
Average daily hot metal output, a gauge of iron ore demand, dipped by 0.7% from the prior week to 2.42 million tons as of May 30. This is 2.6% higher than the same period a year before, Mysteel data showed.
Pei Hao, a senior analyst at international brokerage Freight Investor Services, believes the bounce in ore prices is somewhat influenced by the rally in coal and coke prices.
Other steelmaking ingredients, coking coal and coke (DCJcv1), rallied by 7.19% and 5.72%, respectively, after touching nearly nine-year lows on Tuesday.
Expectations of a reduced supply contributed to the price surge in the coal market, said analysts.
“We have liquidated all our short positions today,” said a Singapore-based coal trader on condition of anonymity.
Steel benchmarks on the Shanghai Futures Exchange posted gains. Rebar RBF1! added 1.57%, hot-rolled coil EHR1! gained 1.61%, wire rod (SWRcv1) advanced 1.14% and stainless steel HRC1! ticked 0.59% higher.
Source: Reuters