Dalian iron ore pulls back from 3-yr high as steel steadies

2017-01-18

Dalian iron ore pulls back from 3-yr high as steel steadies

Chinese iron ore futures pulled back from a three-year high on Tuesday as steel prices steadied after gaining more than 14 percent so far this month on Beijing’s renewal of its push to slim down a bloated industry.

Expectations that China will continue to reduce excess steel capacity could keep prices of the metal elevated, spurring mills to replenish stocks of raw materials including iron ore.

The most-traded iron ore on the Dalian Commodity Exchange jumped more than 4 percent to hit an intraday peak of 664.50 yuan ($96) a tonne, its strongest since December 2013. It later trimmed gains to 642 yuan at 0246 GMT, up 0.9 percent.

Rebar on the Shanghai Futures Exchange was flat at 3,321 yuan a tonne, earlier gaining as much as 2.5 percent.

Higher steel prices have increased the profitability of Chinese mills significantly and “that’s certainly given them confidence to restock raw materials such as iron ore,” said Daniel Hynes, commodity strategist at ANZ.

Monday’s spike in iron ore futures helped lift spot prices to their highest in more than two years, with some traders building up steel inventories on expectations of further price increases.

“It’s driven by steel mills and traders and certainly there’s expectation within that market of further capacity cuts” that could push steel prices higher, said Hynes.

“At the same time they are seeing relatively solid growth in demand from a variety of infrastructure programs that the (Chinese) government has implemented or boosted spending in over the past few months.”

Iron ore for delivery to China’s Qingdao port climbed 3.9 percent to $83.65 a tonne on Monday, according to Metal Bulletin.

It was the highest for the spot benchmark since October 2014 and followed a 7 percent surge to a three-year high in Dalian iron ore futures on Monday.

Both steel and iron ore futures posted their best week since November last week after China said it would shut down production of low-grade steel products by end-June, its boldest effort yet to tackle overcapacity and pollution.

Source: Reuters (Reporting by Manolo Serapio Jr.)

Source from : Commodity News

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