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Iron ore price extends gains on China demand hopes

Steelmaking process. (Image by China Baowu Steel)

The iron ore price rose on Friday as traders returned from the New Year holidays feeling optimistic about potential demand recovery in China.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $128.03 a tonne during morning trading, up 0.3% compared to Thursday’s closing, the highest since October 12.

Iron ore’s most-active May contract on China’s Dalian Commodity Exchange ended daytime trading 1.4% higher at 719 yuan ($112.78) a tonne, rising for a fourth straight session and touching 725.50 yuan earlier in the day.

“The current rise in raw materials and the limited production during the Winter Olympics have boosted steel prices to a certain extent, but the demand side is still weak,” Sinosteel Futures analysts said in a note.

China is expected to curb mills’ operations in its steel production hubs to ensure clean air during the Beijing 2022 Olympics next month.

But analysts said hopes for an easing of steel production controls after the Games have helped underpin iron ore, along with some restocking demand ahead of the Chinese Spring Festival holidays starting January 31.

“After the Winter Olympics, there is an opportunity to relax the production limit (for steel),” analysts at Zhongzhou Futures said in a note.

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(With files from Reuters)