Benchmark iron ore futures in China climbed to their highest in more than a week on Thursday as steel mills continued to buy raw materials, but the uncertain outlook for the country's steel demand capped further gains. Steel prices fell, with construction steel rebar retreating after two days of gains. The May 2019 iron ore contract, the most active on the Dalian Commodity Exchange, ended the session up 2.7 percent at 626.5 yuan ($93.33) a tonne, the highest close since March 4 and just below the day's high of 628 yuan.
"Steel mills in China have started ramping up their sintering utilization," said Darren Toh, a data scientist with Singapore-based steel and iron ore data analytics company Tivlon Technologies. Sintering machines have reportedly been allowed to restart in some areas in China's top steelmaking city of Tangshan, which has imposed production restrictions on mills to improve air quality, but this could not be immediately verified.
"Our data analytics model is suggesting that iron ore prices are starting to firm from the second half of March onwards," Toh said, adding that Tivlon is maintaining its $120 a tonne target price by August this year. Coke edged up 0.6 percent to 2,012 yuan a tonne, but coking coal ended little changed at 1,234 yuan.
Some of the macroeconomic data in China is "quite supportive of the commodities market", said metals and mining analyst Helen Lau of Argonaut Securities. "If you look at the property investment, it's accelerating. The fixed asset investment is stronger also and the number is in line with some market expectations, reflecting government support," she said.
Data on Thursday showed growth in China's industrial output fell to a 17-year low in the first two months of the year, pointing to further weakness in the world's second-biggest economy. However, fixed-asset investment growth quickened to 6.1 percent as the government fast-tracked more road and rail projects.
Lau said more data is needed "to feel the pulse of the economy". "We do not have enough data that will give a clue (on the economy's direction), that will guide the outlook," she said. "(Prices are) mainly driven by news flows, such as developments in the (US-China) trade talks." The most-active rebar contract on the Shanghai Futures Exchange fell 0.6 percent to 3,795 yuan a tonne. Hot rolled coil, used in cars and home appliances, dropped 1.3 percent to 3,713 yuan.
China's average daily steel output rose in January and February, as mills in the world's top producer ramped up production amid firm steel margins and easier environmental restrictions.