BEIJING: Iron ore futures extended gains on Friday, and were headed for a third straight weekly rise, underpinned by renewed hopes that top consumer China’s crackdown on a price war will pave the way for another round of reforms to curb steel overcapacity.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) traded 2.07% higher at 766 yuan ($106.82) a metric ton as of 0303 GMT.
The benchmark August iron ore on the Singapore Exchange was 0.85% higher at $99.85 a ton as of 0253 GMT.
Both benchmarks have risen 4% so far this week.
The strength in the ferrous market was mainly driven by sentiment fuelled by environmental protection-related production restrictions in the major steel production hub Tangshan and hopes of supply-side reform, said Jiang Mengtian, principal analyst at consultancy Horizon Insights.
“Steel market benefited most directly as reflected in the futures prices and the wave of stockpiling from downstream consumers, which helped lift iron ore prices,” said Jiang.
The ore price strength came despite signs of demand softening.
The average daily hot metal output, a gauge of iron ore’s demand, slid 0.6% week-on-week to 2.39 million tons in the week as of July 10, the lowest level since April 3, data from consultancy Mysteel showed.
Other steelmaking ingredients on the DCE recorded further gains, with coking coal and coke rising 4.02% and 2.71%, respectively.
“Coking coal price saw the most significant rebound due to low valuation previously,” Jiang added.
Most steel benchmarks on the Shanghai Futures Exchange firmed.
Rebar rose 1.32%, hot-rolled coil added 1.39% and wire rod advanced 1.77%, while stainless steel lost 0.47%.
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