SINGAPORE: Prices of iron ore futures rose on Monday, supported by strong restocking demand from steel mills in China amid healthy profit margins and low inventories, although expectations of production cuts in northern China capped the gains.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) traded 0.51% higher at 794 yuan ($110.55) a metric ton, as of 0254 GMT. The benchmark September iron ore on the Singapore Exchange was 1.27% higher at $103.4 a ton.
Healthy margins and low inventories have led steel mills to restock, contributing to higher iron ore demand, though futures pared some gains as investors expect steel production cuts in the north of China ahead of a military parade on September 3, said analysts from ANZ.
In July, China’s blast-furnace steel mills achieved better profits on finished steel sales despite a rise in production costs, mainly due to a fast recovery in domestic steel prices, Chinese consultancy Mysteel said in a note. Still, seasonal declines in consumption persist, with high temperatures and heavy rains significantly impacting downstream construction and resulting in steel inventory accumulation, said Hexun futures, adding that firm raw material prices lent support to steel prices.
In Japan, major steelmaking companies are witnessing a fall in quarterly steel output and could see the lowest annual output since 1968, amid lower prices and the potential impact of US tariffs on car production.
This is compounded by a surge in cheap steel exports from top producer China, exerting downward pressure on prices. Other steelmaking ingredients on the DCE gained ground, with coking coal and coke up 1.85% and 1.82%, respectively. Steel benchmarks on the Shanghai Futures Exchange all rose. Rebar increased 0.84%, hot-rolled coil climbed 0.88%, wire rod edged up 0.15% and stainless steel strengthened 1.34%.
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