MANILA: 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.
Port stockpiles declined for two consecutive weeks to 130.3 million tonnes, as of Nov. 27, following a five-month rise, SteelHome data showed.
"Strong steel production and retreating iron ore imports are stalling further rises in iron ore inventories," said Daniel Hynes, a senior commodity strategist at ANZ.
Sentiment across China's ferrous metals markets has also been boosted by rising prospects of a swift global economic recovery from the pandemic on encouraging developments regarding potential COVID-19 vaccines.
Construction steel rebar on the Shanghai Futures Exchange rose 0.5%, hot-rolled coil advanced 2.4% and stainless steel gained 1.4%. Tight supply pushed Dalian coking coal higher by 4.1%, while coke jumped 2.8%.
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