Dalian and
Singapore iron ore futures rose in a volatile session on Tuesday, as traders
focused on improving steel margins in top steel producer China, while weighing
prospects of further output cuts.
The
most-traded iron ore, for September delivery, on China’s Dalian Commodity
Exchange DCIOcv1 ended daytime trade 1.5% higher at 807 yuan ($119.32) a tonne,
near Monday’s four-week high of 817.50 yuan.
On the
Singapore Exchange, the steelmaking ingredient’s benchmark September contract
SZZFU2 climbed 0.7% to $115.50 a tonne, as of 0725 GMT, but off the previous
session’s four-week peak of $120.95.
“The
recovery in mills’ margins has spurred hopes that (raising) production capacity
may resume more quickly than expected,” said Daniel Hynes, a senior commodity
strategist at ANZ.
Improved
profitability has prompted Chinese mills to restart some blast furnaces, among
dozens of such production facilities idled as weak demand in recent weeks had squeezed
margins.
Steel
margins have improved following a price rebound, and Mysteel consultancy said
the momentum could be sustained this month, citing its chief analyst Wang
Jianhua.
That could
boost demand for other steelmaking ingredients. Dalian coking coal DJMcv1
climbed 3.7%, rising for a fifth straight session, while coke DCJcv1 advanced
2.1%.
Rebar on the
Shanghai Futures Exchange SRBcv1 rose 0.5%, hovering near a three-week high.
Hot-rolled coil SHHCcv1 gained 0.2%, while stainless steel SHSScv1 climbed 1.2%.
But China’s decarbonisation goals and ailing property sector remain key
concerns for iron ore markets.
China’s
state planning agency, the National Development and Reform Council, and
industry group China Iron & Steel Association met last week mandating
further crude steel production cuts for the second half of 2022, according to
Navigate Commodities.
China aims
to cut annual steel production for a second straight year to curb emissions.
First-half output was down 6.5% from the same period last year.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Subhranshu
Sahu)