Iron ore futures extended gains as improved rebar margins at Chinese steel mills buoyed demand prospects.
Prices jumped 10% in Singapore, taking the raw material’s surge since a low in September to about 50%. Investors are continuing to weigh China’s autumn demand against a power crisis that has rattled commodities markets.
Rebar margins in China increased in late September, according to a Mysteel survey of 91 blast furnaces mills in the country. Meanwhile, the researcher estimated that daily crude steel production in early October is expected to rise 0.6% to 2.6 million tons from late September.
“Steel output is reportedly set to increase in October in some parts of China, like Tangshan, Jiangsu, Zhejiang and Anhui, after these regions exceeded steel production cuts in September,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, wrote in a note. “The impacted mills may see November output either match or exceed October levels.”
China’s steel-production restrictions may ease heading into 2022 to meet strong demand, Fortescue Metals Group CEO Elizabeth Gaines said last week at the Financial Times Mining Summit. The iron ore market is very “robust,” even though prices have dropped recently on a property slowdown and steel output curbs, she added.
Iron ore stockpiles across ports in China rose 0.2% last week amid the weeklong National Day holiday break, according to Chinese industry website Steelhome. Meanwhile, China is facing heavy rains and floods that have seen 60 of the 682 coal mines closed in Shanxi province, adding to a worsening energy crunch that’s a threat to the nation’s economy.
Bad weather in the past week has caused difficulties in the transportation of iron ore from ports inland, which resulted in the rise in stockpiles, according to Dayue Futures Co. Ltd. Restocking demand from mills in Tangshan that have resumed some production will help iron ore demand in the short-term, although the market is still keenly looking for signs of whether steel curbs will ease.
Futures in Singapore were up 10% at $137.25 a ton. Prices in Dalian rose 4.8%.
