Iron ore was headed for its first back-to-back weekly gain since July, as expectations of production resuming in China boosted sentiment.
Futures of the steelmaking ingredient slipped but held above $US104.40 a tonne in early trading. Mill margins have weakened in recent weeks but prices have found support in the prospect that steel output will come back online after production was cut to prevent pollution during a major military parade in China.
“While it is unusual for iron ore prices to rise alongside falling steel mill margins, it is not unprecedented,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note to investors, pointing to the same pattern in late 2023 and early 2024.
However, iron ore still faces a “downward correction risk” if steel margins fall slowly once mills restart activity, Mr Dhar said. CBA predicts prices will decline to $US95/t in the fourth quarter on expectations that China’s steel output will fall around 2% this year.
On the supply side, iron ore exports from Brazil showed continued strength in August, up 17 per cent from the year before, according to government figures. That was just shy of an overall record but the highest ever for that month, according to available data.
