BEIJING: Iron ore futures rebounded on Monday as risk-off sentiment hurt by Chinese intervention last week eased, while low inventories amid rising stockpiling needs, improving steel margins and concerns over supply disruptions helped the market.
The benchmark December iron ore on the Singapore Exchange climbed 1.98% to $131.05 a metric ton, as of 0702 GMT. The most-traded January iron ore on China’s Dalian Commodity Exchange (DCE) ended daytime trading 0.47% higher at 968 yuan ($134.24) a ton after two sessions of losses.
“The rise might be because some traders liquidated their short positions after the upward adjustment on margin. It might also be a test on buying appetite,” said Pei Hao, a Shanghai-based analyst at international brokerage FIS. The DCE raised margin requirements for speculative trading on iron ore futures contracts to 15% from 13% from settlement on Nov. 20.
“Concerns over disruptions on the supply side due to a possible strike at BHP in Australia also played a role,” Pei added. Around 400 train drivers for BHP’s Western Australian iron ore division will begin industrial action late this week.
Falling inventories also boosted sentiment. Stocks of the key steekmaking ingredient at major Chinese ports slid by 1.1% on week to 107.6 million tons as of Nov 17, according to data from consultancy Steelhome.
“Some mills have resumed operation of blast furnaces that had undergone maintenance, thanks to improved margins,” analysts at Huatai Futures said in a note.
Profitability among steelmakers surveyed climbed to 29% as of Nov. 17 from 20.78% a week before, data from consultancy Mysteel showed. The gains in iron ore futures came despite a few northern cities including top steel production hub Tangshan implementing level 2 emergency response from Sunday following a heavy air pollution forecast.
Other steelmaking ingredients weakened, with coking coal and coke on the DCE down 0.48% and 0.11%, respectively. Steel benchmarks on the Shanghai Futures Exchange broadly edged up. Rebar added 0.66%, hot-rolled coil advanced 0.17%, wire rod rose 0.1% while stainless steel declined 0.61%.
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