Iron ore snaps six-day losing streak as low feedstock prices encourage buying

SINGAPORE: Iron ore futures snapped a six-day losing streak on Friday, edging higher as persistently low prices of steelmaking ingredients alleviated cost concerns for steel mills, allowing them to procure more feedstock.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) ended morning trade 1.02 percent higher at 793.5 yuan (USD113.95) a metric ton.

The contract is on track for a 2.64 percent loss this week. The benchmark February iron ore on the Singapore Exchange was 0.93percent higher at USD104.6 a ton as of 0330 GMT.

The contract is set for a 1.65percent week-on-week decline. The continuous decline in iron ore prices helped alleviate market pessimism, allowing steel mills to procure more ore will maintaining profit margins ahead of the Chinese Lunar New Year, according to a note from the Shanghai Metals Market on January 22.

Steel profit margins are still acceptable due to consistently low prices of steelmaking ingredients, coking coal and coke, a trader familiar with the matter told Reuters.

Hence, hot metal output is still expected to increase, and steel mill inventory still has room to grow, he added. Several short-process steel mills in Guangxi and Guangdong plan to suspend production by late January before the Chinese Lunar New Year holidays, with production set to resume in March, according to a note form Mysteel. Though China’s property market slump is expected to continue, stronger fixed-asset infrastructure investment is expected to mitigate the construction related fall in demand in 2026, according to ANZ’s research’s commodity report released on January 23. Energy-related investments are likely to increase as funding pressures ease, allowing for a renewed pick-up in infrastructure investment, the report added.

Other steelmaking ingredients on the DCE gained, with coking coal and coke up 1.11percent and 1.55percent, respectively. Steel benchmarks on the Shanghai Futures Exchange strengthened. Rebar firmed 0.38percent, hot-rolled coil climbed 0.3percent, wire rod grew 0.2percent and stainless steel increased 0.98percent.