Iron ore futures extended gains on Thursday, aided by improved steel margins and the expectation of feedstock replenishment among steel mills in top consumer China.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE) rose for a third straight session to end daytime trade up 1.63% at 777.5 yuan ($110.43) a metric ton, its highest since December 8.
The benchmark January iron ore (SZZFF6) on the Singapore Exchange extended rise to a fourth consecutive session, climbing 0.87% to $104.55 a ton as of 0722 GMT. It touched its highest since November 27 at $104.6 earlier in the day.
Profitability among some mills improved, thanks to the steep falls in coal and coke prices last week, said analysts.
“Some mills may ramp up supply by the end of this month, driven by improved margins, although hot metal output will continue to drop this week,” analysts at Galaxy Futures said.
Hot metal output, a blast furnace product, is typically used to gauge iron ore demand.
Meanwhile, Chinese steel mills, with low in-plant inventory, will initiate a flurry of purchasing to restock raw materials, including iron ore, to meet production needs during the Lunar New Year holiday, which falls in February.
Coking coal and coke, other steelmaking ingredients, surged 6.07% and 5.39%, respectively, following declines earlier this month.
Anticipation of reduced supply due to equipment maintenance by year-end and mills’ restocking needs lent support to coal prices, per analysts at Galaxy Futures.
Most steel benchmarks on the Shanghai Futures Exchange gained ground. Rebar added 1.4%, hot-rolled coil advanced 1.05%, stainless steel rose 0.53%, while wire rod (SWRcv1) fell 1.19%.
Source: Reuters
