Dalian iron ore gains as steel prices rise; on track for fourth weekly gain

SINGAPORE: Dalian iron ore futures gained marginally on Friday, their fifth straight session of rise, as higher steel prices supported the key steelmaking ingredient while expectations of higher shipments weighed.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) traded 0.25% higher at 817 yuan ($120.07) a metric ton, as of 0317 GMT.

The contract has gained about 3% this week so far.

The benchmark June iron ore on the Singapore Exchange was 0.23% lower at $110.50 a ton.

The contract has gained 2.66% this week so far. Both contracts are set to record a fourth consecutive weekly increase.

Higher steel prices are a positive for steel mill margins, buoying iron ore buying interest, according to consultancy Mysteel, adding that steel inventories also declined week-on-week.

Hot metal output fell this week, owing to China’s May Day holiday, but blast furnaces are still operating near peak rates, supporting demand for steelmaking feedstock, according to Mysteel.

On the other hand, Brazilian iron ore shipments increased year-on-year for the month of April to 34.57 million tons from 30.07 million tons, according to government statistics.

Additionally, mining operations resumed on Thursday at two blocks of Guinea’s giant Simandou iron ore project operated by a consortium led by China’s Baowu Resources after workers ended a strike, according to a document seen by Reuters and a union executive.

 Other steelmaking ingredients on the DCE were mixed, with coking coal up 0.31% and coke down 0.16%.

Steel benchmarks on the Shanghai Futures Exchange diverged.

Rebar strengthened 0.43% and hot-rolled coil firmed 0.14%.

Meanwhile, wire rod lost 0.41% and stainless steel slumped 2.32%. Stainless steel inventory in China rebounded after weeks of continuous destocking, as production output exceeded trading volumes, pressuring prices downward, according to a note from Shanghai Metals Market.