The Dalian iron ore price jumped over 6% on Tuesday, fuelled by recent restocking demand at steel firms.
The most-traded iron ore contract on the Dalian Commodity Exchange, for January delivery, ended 2.4% higher at 610 yuan ($95.75) a tonne, after rising as much as 6.4% to 633 yuan in early trade.
“Driven by high profits at mills…iron ore prices will rebound to some extent,” analysts with Huatai Futures wrote in a note, adding demand was hard to be sustained in the long run on cooling steel consumption.
“With iron ore inventory in China at a record high and as steel production keeps declining, we think the downward pressure on iron ore prices will persist,” CreditSights said in a report.
“China’s steel demand, which has been dragged down by weak property and infrastructure investment in the past few months, is now bottoming out.”
China’s factory sentiment improved in November, according to Bloomberg.
The official manufacturing purchasing managers index rose to 50.1, the first time in three months it exceeded the 50 mark that signals an expansion in production. The non-manufacturing gauge, which measures activity in the construction and services sectors, fell slightly to 52.3. Both measures beat economists’ expectations.
“China’s manufacturing outlook remains stable as China maintains its advantage in global manufacturing supply chain amidst the ongoing disruptions and shortages,” said Liu Peiqian, China economist at NatWest Group Plc.
“However, the pace of growth may normalize in coming quarters as the demand outlook softens.”
(With files from Reuters and Bloomberg)