China’s iron ore futures stretched gains to a third day running on Tuesday, backed by expectations Chinese steel mills would replenish stockpiles ahead of a long holiday next month.
Spot iron ore prices soared nearly 4 percent on Monday in their sharpest single-day gain since March, sparking hopes of a recovery in a market hit hard this year by abundant supply.
“There should be some restocking because holidays are coming and that might be the fundamental support for this market for now,” said an iron ore trader in Shanghai.
China’s markets will be shut on Oct. 1-7 for the National Day break.
Iron ore for January delivery on the Dalian Commodity Exchange, the most-traded contract, was up 0.3 percent at 598 yuan ($97) a tonne by midday, after rising more than 1 percent on Monday.
Strong gains in China’s spot steel prices over the weekend as some buyers restocked helped the iron ore market regain footing, lifting prices for spot iron ore cargoes, traders said.
Iron ore for immediate delivery to China .IO62-CNI=SI climbed 3.9 percent to $85.20 a tonne on Monday, according to data provider Steel Index. The price hit $81.90 last week, the lowest since September 2009.
The oversupplied iron ore market may find some relief from expectations that India, once a big iron ore exporter, may import up to 45 million tonnes of the steelmaking commodity over the next three years.
Mining curbs had slashed India’s iron ore output and forced steelmakers such as JSW Steel to source the raw material overseas.
But some traders were uncertain on whether the upward momentum would be sustained.
“I think prices went down too fast and yesterday they went up too fast,” said another Shanghai-based trader.
“Good thing is we don’t have much cargo in hand because it’s not easy to sell as the market becomes choppy.”
Stockpiles of imported iron ore at China’s ports rose by 800,000 tonnes to 112.05 million tonnes as of Sept. 12, SH-TOT-IRONINV according to SteelHome which tracks the data. The inventory hit a record high of 113.7 million tonnes in early July.
While a steep decline in iron ore prices had shut some higher cost producers, including those in China, the country’s output continued to rise, with production in August up 4 percent from a year ago to 136.6 million tonnes.
That brought output for the first eight months of the year to 986 million tonnes, up 8.5 percent.