Follow us
MANILA: Iron ore futures
dipped on Monday, retreating from six-month peaks, though Shanghai steel
benchmarks held firm in the wake of a major shift in China’s Covid-19
containment policy.
The most-traded May iron ore on China’s Dalian
Commodity Exchange ended morning trade 0.3% lower at 806.50 yuan ($115.55) a
tonne.
Dalian iron ore climbed to 823 yuan a tonne on
Friday, its strongest since June 15, as top steelmaker China’s easing of
Covid-19 restrictions lifted hopes of a revival in demand. On the Singapore
Exchange, the steelmaking ingredient’s benchmark January contract was down 1.8%
at $109.55 a tonne, as of 0448 GMT.
“Iron ore futures rallying to close at $111.75/t
on Friday is yet another poignant example of just how much heat and overly
positive sentiment is currently built in to the current pricing structure,”
said Navigate Commodities Managing Director Atilla Widnell.
Iron ore at above $100 a tonne seems “overvalued”
currently, he said, but “the longer prices persist above this level there’s an
increasing likelihood the pricing-floor may start to move higher”.
With miners undertaking seasonal maintenance
programmes in the first quarter of 2023, he said supply is likely to drop. That
may support iron ore prices, along with an improved outlook for Chinese demand.
Steel benchmarks on the Shanghai Futures Exchange rose, with rebar up 0.7%,
hot-rolled coil climbing 0.9%, wire rod gaining 0.3%, and stainless steel
advancing 0.5%.
Widnell said all eyes are now fixed on the annual
Central Economic Work Conference in China scheduled for Dec. 15, with traders
anticipating more property-sector stimulus measures.
Other Dalian steelmaking inputs also advanced,
with coking coal and coke up 4.8% and 2.6%, respectively.
“Whether or not China normalizes trade ties with
Australia, the likelihood of re-emerging Chinese demand for ex-Australian coal should
constrict market balances sufficiently to support prices,” Widnell said.