Iron ore futures jumped on Wednesday, with the Dalian benchmark contract hitting a record high, underpinned by strong demand for the steelmaking ingredient in top ferrous metals producer China. The most-traded iron ore for January delivery on China's Dalian Commodity Exchange gained as much as 3.5% to 934.50 yuan ($142.44) a tonne, before ending daytime trade at 934 yuan.
Iron ore on the Singapore Exchange jumped 2.4% to $130.24 a tonne by 0705 GMT, advancing for a seventh straight session. Strong demand has propelled spot iron ore prices in China to the highest level since January 2014 this week, trading at $131.50 a tonne on Tuesday, according to SteelHome consultancy.
"The iron ore market is indeed very bullish," said Richard Lu, a senior analyst at CRU consultancy in Beijing. "From a fundamental perspective, steel mills are now earning decent profits on steel sales."
Comfortable margins will encourage Chinese steel mills to keep their blast furnaces operating "intensively", which along with restocking demand from mills should keep iron ore prices supported, Lu said.
He also cited "port capacity constraints" in China that could hamper the flow of iron ore imports.
