Iron ore prices rebounded on Monday after a five-day slump, due to a recovery in steel margins in China.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $202.74 a tonne on Monday, up 0.7% from Friday’s closing.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange ended daytime trading 0.9% higher at 1,136.50 yuan ($175.22) a tonne.
Dalian iron ore marked its steepest weekly drop in 17 months on Friday due to worries about China’s steel production caps.
Steel producers in Anhui, Gansu, Fujian, Jiangsu, Jiangxi, Shandong, and Yunnan have been told to limit their output to 2020 volumes amid China’s intensified efforts to curb carbon emissions.
“Plunging iron ore costs and surging steel prices have resulted in a sharp recovery in steel margins, particularly for long products,” Atilla Widnell, managing director at Navigate Commodities in Singapore, said in a note.
“We’re fundamentally and technically bullish in the short term, with arrivals of iron ore cargoes landing in China expected to fall faster than domestic consumption over the past and coming week,” Widnell said.
“There certainly isn’t sufficient supply availability from the seaborne market to feed Chinese steel consumption growth in the second half, particularly for long products.”
Global steel production gained 11.6% year-on-year in June, and crude steel output rose to 167.9 million tonnes during the month, World Steel Association data showed on Friday.
Compared to the previous month, average daily steel production worldwide fell by 0.5% in June, while Chinese production declined by 2.5%.
(With files from Reuters)