Iron Ore Futures Surge on Strong Steel Consumption in China
Iron ore futures advanced on Thursday, buoyed by robust steel consumption data from China, the world's largest consumer. This shift in investor focus towards growing ore demand triggered a wave of short covering.
Key Highlights:
* The most-traded May iron ore contract on the Dalian Commodity Exchange (DCE) climbed 2.26% to 837 yuan ($115.15) per metric ton.
* The March iron ore benchmark on the Singapore Exchange rose 1.65% to $108.45 per ton, reaching its highest level since February 14.
* Consumption of rebar, used in construction, surged by 163% week-on-week to 1.69 million tons as of February 20.
Market Dynamics:
Analysts attribute the surge in ferrous market prices to better-than-expected steel consumption. This has sparked optimism that demand for steelmaking ingredients will rise in the coming weeks, as steel mills increase production.
Despite uncertainties surrounding additional stimulus measures from China, the limited change in benchmark lending rates suggests a cautious approach to monetary policy.
Impact on Producers:
The gains in ore prices may provide temporary relief for major producers such as Rio Tinto, BHP, Fortescue, and Vale. These companies have recently reported significant profit declines due to falling prices and the slowdown in China's property market.
Other Steelmaking Ingredients:
Other steelmaking ingredients on the DCE also advanced, with coking coal and coke rising by 2.89% and 2.62%, respectively. Steel benchmarks on the Shanghai Futures Exchange were also higher, with rebar gaining 1.24%, hot-rolled coil adding 1.02%, wire rod edging up 0.26%, and stainless steel rising 1.15%.