Chinese iron ore and coking coal futures jumped more than 2 percent on Wednesday, rebounding from multi-month lows after strong economic data from China pointed to firm demand conditions in the world's No. 2 economy. China's industrial output and fixed-asset investment both grew faster than market expectations in January and February as its steel output rose to the highest in months ahead of a seasonal pickup in construction demand.
The data "signalled a more robust demand picture than many had assumed," said Matt France, head of institutional sales for metals in Asia at Marex Spectron.
France said in a note that the growth in China's fixed-asset investment, which accelerated to 7.9 percent in January-February versus analysts' estimate of 7.0 percent, "could encourage some renewed investment in the base and bulks sectors." The most-traded May iron ore contract on the Dalian Commodity Exchange closed up 2.1 percent at 490 yuan ($78) a tonne. It touched a four-month low of 475.50 yuan on Monday.
Stronger futures should help spot iron ore prices, which dropped below $70 a tonne this week, recover. Iron ore for delivery to China's Qingdao port dropped 0.2 percent to $69.78 a tonne on Tuesday, the lowest since December 11, according to Metal Bulletin.
Coking coal climbed 2.7 percent to 1,294.50 yuan a tonne after touching a three-month trough earlier in the session. Coke rose 1.1 percent to 2,021 yuan per tonne after touching a nearly two-month low. The data also helped rebar futures recover, though high steel production and stockpiles in China limited price gains.
The price of construction steel product rebar on the Shanghai Futures Exchange gained 0.6 percent to end at 3,735 yuan a tonne after falling as far as 3,657 yuan, its lowest since November 20. China's daily steel output rose in the first two months of the year as mills raced to take advantage of firm prices.
Chinese steel mills are expected to ramp up production further after Thursday when winter curbs on producers in northern cities are lifted at the end of the winter heating season. Some cities, including top-producing Tangshan, plan to extend the output restrictions. "After March 15, steel production in north China will increase, but I also expect demand to improve as the construction season gets underway," said an iron ore trader in Beijing.
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