[MANILA] Spot iron ore prices traded near 3-1/2-month highs above US$61 a tonne this week and are likely to hold up as Chinese steel producers restock on the raw material ahead of the G20 summit next month.
The steelmaking ingredient has risen 42 per cent year-to-date to be among the best performing commodities, far outpacing oil.
That was largely driven by the strength in Chinese steel prices as Beijing steps up efforts to tackle a chronic glut that has forced mills to ship more abroad, angering overseas rivals.
"While we've seen prices dip in the last couple of days, in general we expect iron ore to hold up relatively well," said Daniel Hynes, analyst at ANZ Bank.
"The recent (mill) closures are tightening the steel market in China and boosting steel prices and margins."
Iron ore for delivery to China's Tianjin port was off 0.7 per cent at US$61.10 a tonne on Thursday, according to The Steel Index.
But the spot benchmark was still up modestly for the week, on track for its fourth weekly gain in five. It hit US$61.80 on Aug 16, the highest since May 3.
Mr Hynes said he also expects some Chinese mills to replenish iron ore supplies ahead of the Sept 4-5 G20 summit in China's eastern city of Hangzhou.
"Mills will be pretty keen to push out any steel and restock iron ore leading into that event," he said.
Amid efforts to curb overcapacity, Agricultural Bank of China Ltd, China's third-biggest lender, has said it is increasing its scrutiny of lending to sectors with excess capacity including coal and steel.
"We've always expected market forces to continue to drive closures in steel mill capacity and that can come in the form of increased tightness in lending," said Mr Hynes.
The most-traded rebar on the Shanghai Futures Exchange was down 0.8 per cent at 2,542 yuan (S$517) a tonne by 0234 GMT. The construction steel product touched a nearly four-month peak of 2,649 yuan on Aug 16.