Iron Ore Price Extends Gains in Steel Optimism
The most-traded iron ore contract on the Dalian Commodity Exchange, for September delivery, gained 5.5% to 1,256 yuan ($ 195.26) per tonne before closing up 4.3% to 1243 yuan.
“Steel consumption is still at its short-term seasonal peak… factories are actively producing at high profits, which supports commodities,” Huatai Futures analysts wrote in a note.
China’s steel production has reached an all-time high despite the government’s promise to reduce annual output to reduce pollution and raise raw material costs.
Crude steel production in April rose to 97.9 million tonnes to hit record monthly and daily rates.
Related reading: Brazil’s global iron ore production growth accelerates – report
Data tracked by consulting firm Mysteel showed iron ore shipments from Australia and Brazil fell from 2.24 million tonnes to 22.58 million tonnes last week.
Mysteel expects single-digit growth in apparent steel consumption in China to persist beyond 2021 due to the country’s medium-term urbanization goals, according to a memo from UBS Group AG, citing a call with Henry Liu, iron ore analysis manager in the pricing and business intelligence department.
“As China’s steel production continues to grow, its steel margins remain high and the supply of offshore iron ore remains limited, we believe the price of iron ore may remain around the current level. until 2Q, but will likely remain very volatile, ”Morgan Stanley analysts wrote in a note.
Other risks for the rally could loom as Brazil’s supply could resume in the coming months. Brazilian producers are looking to generate cash and make new investments to supply a tight market supported by strong demand driven by China, according to the chairman of the country’s mining industry group, Ibram.
(With files from Bloomberg and Reuters)