By Enrico Dela Cruz
Singapore iron ore futures rose for a third straight session on Monday, buoyed by renewed optimism over demand for the steel-making ingredient in the short term as signs emerged that top steel producer China is back to ramping up output this month.
Iron ore’s most-active January contract on the Singapore Exchange rose as much as 6.7% to $127.95 a tonne, its highest since Oct. 12.
But the most-traded May contract on China’s Dalian Commodity Exchange erased earlier gains to close 1.3% lower at 673.50 yuan ($105.60) a tonne, retreating from a seven-week peak.
China’s rising imported iron ore stockpiles, which last week hit their highest level since mid-2018, and steel production curbs that are expected to be enforced as China aims for smog-free skies for the Beijing Olympics in February, tempered investors’ enthusiasm.
Iron ore prices have rebounded this month, with the benchmark 62% grade in China’s physical market touching $120 a tonne on Friday, also a seven-week high, SteelHome consultancy data showed.
“Analysts expect a rebound in steel output as Beijing’s yearly targets have been met, prompting mills to resume production,” resources sector advisor and broker SP Angel said in a Dec. 17 note.
With China churning out 946.36 million tonnes of crude steel during January-November, down 2.6% from the year-ago period, there is scope for mills to ramp up production as the target is to limit this year’s output to no more than last year’s volume of 1.05 billion tonnes in order to control emissions.
Crude steel output in the first 10 days of December climbed 12% from a month earlier, ANZ analysts said, citing data from the China Iron & Steel Association.
Construction steel rebar on the Shanghai Futures Exchange fell 1%, while hot-rolled coil shed 1.6%. Stainless steel slipped 0.4%.
Dalian coking coal climbed 0.7%, but coke dropped 2.2%.
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The benchmark contract, however, was on course for its third straight weekly rise, supported earlier this week by optimism about China’s stimulus measures to bolster its economic growth and policy support for its debt-saddled property developers.