China iron ore futures surge past 1,000 yuan on supply worries, steel demand

  • Steel rebar on the Shanghai Futures Exchange gained 0.7% to 4,070 yuan a tonne. Hot-rolled coil was 0.3% higher at 4,3862 yuan a tonne. Stainless steel increased 1.9% to 13,825 yuan a tonne.
11 Dec, 2020

BEIJING/SINGAPORE: Benchmark iron ore futures on China's Dalian Commodity Exchange soared nearly 10% on Friday to break above 1,000 yuan ($152.95) per tonne for the first time, spurred by supply concerns and booming steel demand in the world's second-largest economy.

Traders said concerns that a cyclone might affect loadings in top supplier Australia were the latest supply-side hit for the market, which is already grappling with lower output from number two producer Brazil.

Miner BHP Group assured the China Iron & Steel Association that weather conditions would not affect shipments and that the company was aiming to reach the upper limit of its output range.

However, three iron ore traders on Friday said any disruption to supplies would be impactful given the current strong state of demand.

"From December to end-February is Australia's typical cyclone season, which could affect their output," said a Beijing-based trader surnamed Chen.

China's manufacturing sector is booming, and goods exports in November jumped by their most in almost three years thanks to strong global demand for steel-heavy appliances.

That voracious appetite has surpassed the expectations of many steel producers, who have struggled to keep up with demand.

Steel product stocks in China have declined 34.8% since September.

"Steel mills and traders were too pessimistic earlier," said a Shandong-based iron ore trader. "They didn't expect steel products' destocking could be this good before November."

Further fanning supply concerns, the state-backed Global Times wrote in an editorial on Thursday that "it is wishful thinking that iron ore could be an exception in ongoing China-Australia trade rows," in reference to the spat between Beijing and Canberra that has affected trade in coal, beef and other products.

More than 60% of China's iron ore imports come from Australia.

"If iron ore prices continue to soar, resulting in turmoil in the industry, more calls for regulatory interventions should be expected," said the editorial.

The most-traded iron ore futures contract on the Dalian Commodity Exchange, for May delivery, surged as much as 9.9% to 1,042 yuan per tonne in early trading on Friday.

Steel rebar on the Shanghai Futures Exchange gained 0.7% to 4,070 yuan a tonne. Hot-rolled coil was 0.3% higher at 4,3862 yuan a tonne. Stainless steel increased 1.9% to 13,825 yuan a tonne.

Coking coal plunged 6.1% to 1,516 yuan a tonne, while coke inched 0.1% higher at 2,506 yuan a tonne.

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