Iron ore futures dipped on Monday, retreating from six-month peaks, although Shanghai steel benchmarks held firm on demand hopes after China relaxed its COVID-19 containment policy.
The most-traded May iron ore on China’s Dalian Commodity Exchange ended daytime trade 0.8% lower at 802.50 yuan ($115.08) a tonne.
Dalian iron ore climbed to 823 yuan a tonne on Friday, its strongest since June 15, as top steelmaker China eased COVID curbs.
On the Singapore Exchange, the steelmaking ingredient’s benchmark January contract was down 2.4% at $108.85 a tonne, as of 0700 GMT.
“Iron ore futures rallying to close at $111.75/t on Friday is yet another poignant example of just how much heat and overly positive sentiment is currently built in to the current pricing structure,” said Navigate Commodities Managing Director Atilla Widnell.
Iron ore at above $100 a tonne seems “overvalued” currently, he said, but “the longer prices persist above this level there’s an increasing likelihood the pricing-floor may start to move higher”.
With miners undertaking seasonal maintenance programmes in the first quarter of 2023, he said supply is likely to drop. That may support iron ore prices, along with an improved outlook for Chinese demand.
Steel benchmarks on the Shanghai Futures Exchange rose, with rebar SRBcv1 up 0.7%, hot-rolled coil climbing 0.8%, wire rod gaining 1%, and stainless steel advancing 0.7%.
Widnell said all eyes are now fixed on the annual Central Economic Work Conference in China scheduled for Dec. 15, with traders anticipating more property-sector stimulus measures.
Other Dalian steelmaking inputs also advanced, with coking coal DJMcv1 and coke DCJcv1 up 4% and 2.5%, respectively.
“Whether or not China normalizes trade ties with Australia, the likelihood of re-emerging Chinese demand for ex-Australian coal should constrict market balances sufficiently to support prices,” Widnell said.