Dalian iron ore hits multi-month high on demand optimism

DALIAN iron ore futures hit an eight-month high on Friday (Mar 3), driven by favourable fundamentals and optimism about future steel demand.

The most-traded May iron ore futures contract on the Dalian Commodity Exchange (DCE) ended daytime trade 1.04 per cent higher at US$133.15 a tonne, a peak since July 2022.

On the Singapore Exchange, the benchmark April iron ore was up 0.1 per cent at US$126.5 a tonne, as of 0700 GMT.

Mills are ramping up production but their iron ore inventories are relatively low, supporting iron ore prices, said a Shanghai-based iron ore trader, who requested anonymity as he is not authorised to speak to media.

The blast furnace operational rate of 247 surveyed steel mills across China stood at 81.07 per cent as of March 3, recording a year-on-year rise of 6.35 per cent, data from consultancy Mysteel showed.

Portside iron ore inventories, however, fell by 2.23 million tonnes week-on-week to approximately 140 million tonnes, the data showed.

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Steel prices are not rising as much as raw material prices, leaving mills struggling to generate profits, a Shanghai-based iron ore analyst said.

Rising steel output will also prevent steel margins from improving, analysts from Huatai Futures said in a note. The expectation of growing demand from steel mills supported coke prices, while increasing overseas supply prospects temporarily weighed on coking coal. Coke gained 0.46 per cent, while coking coal fell 1.01 per cent.

Steel futures prices were on the uptrend. Rebar on the Shanghai Futures Exchange climbed by 1.26 per cent to 4,272 yuan (S$833.4) a tonne, hot-rolled coil gained 1.34 per cent, stainless steel grew 0.8 per cent. Wire rod ticked down 0.1 per cent, though. REUTERS