Dalian and Singapore iron ore futures rebounded on Monday from oversold levels, although traders’ disappointment particularly over tepid demand for construction steel products in China capped gains.
Benchmark prices of the steelmaking ingredient slumped last week, hitting the lowest levels in more than five weeks on China’s Dalian Commodity Exchange and falling below $120 a tonne on the Singapore Exchange.
Along with the dismay over a fall in demand for construction steel products during what is normally a peak season, sentiment was also dampened by news that top steel producer China was considering cutting its annual crude steel output by about 2.5% this year in line with its policy to curb emissions.
Traders were also mindful of Chinese regulators’ frequent warnings against excessive market speculation and iron ore hoarding, as prices had rallied dramatically from October lows on expectations of strong demand from a recovering Chinese economy.
Such “a perfect storm of bearish factors” had dragged down prices, and iron ore “now looks and feels heavily oversold”, Navigate Commodities managing director Atilla Widnell said.
The most-traded May iron ore on the Dalian exchange DCIOcv1 ended daytime trade 2.2% higher at 873.50 yuan ($127.00) a tonne, after falling for seven straight sessions.
On the Singapore Exchange, iron ore’s benchmark April contract SZZFJ3 was up 0.4% at $120.15 a tonne, as of 0710 GMT.
Technical support was seen at around the $117-$119 a tonne levels, Widnell said.
Other Dalian steelmaking inputs were also firmer, with coking coal DJMcv1 and coke DCJcv1 up 0.5% and 0.9%, respectively.
Rebar on the Shanghai Futures Exchange SRBcv1 climbed 0.5% following an eight-session selloff, while hot-rolled coil SHHCcv1 was flat, wire rod SWRcv1 climbed 3%, but stainless steel SHSScv1 slipped 0.4%.
Widnell said the Chinese Ministry of Industry and Information Technology’s prohibition of new steel capacity additions and enforcement of capacity replacement programmes should lend support to rebar prices.
Source: Reuters
