MANILA: China's iron ore resumed rally during the last few minutes of trading on Thursday to set a fresh record, still buoyed by expectations that supply will remain tight and demand could pick up.
Bucking the downtrend in the ferrous complex, the most-actively traded September 2019 iron ore contract on the Dalian Commodity Exchange rose as much as 1.6pc to 782 yuan ($113.01) a tonne, before closing at 781.5 yuan.
It fell 1.5pc earlier in the session as market participants locked in gains after the steelmaking feedstock's surge to record highs earlier this week fuelled by expectations that supply would not improve in the second half of the year.
"I haven't seen any significant changes in the fundamentals. Some market participants just took profit ... It's a short-term correction," said Richard Lu, a senior analyst at metals consultancy CRU Group's Beijing office, before the late rally.
While demand for iron ore could still falter as Chinese authorities continue to enforce strict anti-pollution measures, support to prices remains intact amid hopes that China will roll out more infrastructure projects to support its slowing economy.
Chinese regulators should step up support for the economy and keep ample liquidity in the financial system, Vice Premier Liu He said on Thursday, suggesting Beijing would soon unveil more policies to bolster growth amid rising US trade pressure.
China's environment ministry, meanwhile, has summoned the mayors of six northern cities, including Baoding and Langfang in the steel heartland of Hebei province, to a meeting to account for their failures to meet winter targets to cut smog.
"But fundamentally, there's some support for iron ore.
It's a tight market, with port inventories in China currently very low," Lu said.
"That's why steel mills have to be active in securing cargoes."
Imported iron ore inventories at Chinese ports have declined to 121.6 million tonnes, the lowest since early 2017, latest data compiled by SteelHome consultancy showed, amid reduced shipments from top suppliers in Brazil and Australia.
The surge in iron ore prices has resulted in a slump in profit margins for Chinese steel mills, prompting them to scramble for lower-grade supply to cut costs.
Spot iron ore for delivery to China were priced at $72.5 a tonne for the 52pc grade and $92.0 for the 58pc grade, compared with $120.5 for the 65pc grade and $104.5 a tonne for the 62pc grade, based on SteelHome data as of Wednesday.
As iron ore prices rallied, other steelmaking ingredients were lower on Thursday, with Dalian's coking coal contract down 1.0pc at 1,405 yuan a tonne. Coke ended 0.5pc lower at 2,151.5 yuan.
The most-actively traded October 2019, construction steel rebar contract on the Shanghai Futures Exchange slipped 0.3pc to 3,792 yuan a tonne.
Hot-rolled coil, used in cars and home appliances, dipped 0.2pc to 3,637 yuan.
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