Dalian iron ore extends gain as recovering steel mill profitability lifts demand

SINGAPORE: Dalian iron ore futures prices rose for a fifth straight session on Monday, as a recovery in profitability at steel mills boosted demand and a shortage of Pilbara Blend fines tightened supplies.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) gained 0.26 percent to 779 yuan (USD110.65) a metric ton by 0249 GMT. The benchmark January iron ore on the Singapore Exchange was 0.38percent lower at USD104.3 a ton. Steel mill profitability has recovered gradually, with some mills resuming production, said Chinese broker Everbright Futures.

The structural shortage of Pilbara Blend fines remains unresolved, supporting iron ore prices and providing cost support for steel, said analysts from Galaxy Futures.

China, the world’s largest producer and consumer of steel, plans to implement a licence system from 2026 to regulate exports of the metal in the face of increased protectionist backlash worldwide. Exports are expected to remain high in the short term before the licence system comes into force, said Galaxy.

Elevated iron ore prices in recent years have accelerated global investment in new mining capacity, pushing the global iron ore market into a decisive phase of supply expansion, said consultancy Mysteel. Total iron ore stockpiles across ports in China climbed 1.19 percent week-on-week to about 145.5 million tons, as of December 19, according to SteelHome data.

Broadly, China left benchmark loan prime rates unchanged for the seventh consecutive month in December, suggesting that authorities were not in a rush to deliver fresh monetary easing measures.

Other steelmaking ingredients on the DCE lost ground, with coking coal and coke down 1.35percent and 0.23percent, respectively.