The Iron ore price rose on Thursday, buoyed by hopes of a pick-up in steel demand in China.
China’s success in stamping out its covid-19 outbreak also bolstered the outlook for commodities from copper to oil.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $152.92 a tonne, up 2.7% from Wednesday’s closing.
The most-traded iron ore contract for January delivery on China’s Dalian Commodity Exchange ended daytime trading 0.7% higher at 816 yuan ($125.89) a tonne.
The pullback of iron ore prices from record peaks scaled in May helped boost steel margins, which may have prompted Chinese mills to increase their production.
Daily crude steel production over August 11-20 averaged 2.14 million tonnes, up 4.6% compared with the average volume in the first 10 days of the month, analysts said, citing a report from the China Iron & Steel Association.
Optimism around Chinese steel demand is providing some support to steel and iron ore prices.
“An acceleration in local government bonds (issuance) is also stoking hopes of stronger steel demand in coming months,” said ANZ senior commodity strategist Daniel Hynes, citing the more than 600 billion yuan worth of notes sold since last week by local authorities.
Hynes said the proceeds from these bond sales are typically used to fund infrastructure projects, adding that “the headwinds are still strong for the steel and iron ore market.”
“Iron ore just cannot be the only one lagging while everything else in steel space is massively bid,” Xiaoyu Zhu, a metals trader at StoneX Financial told Bloomberg.
“After the price spike in coal products in the last two days, it’s hard for iron ore to stay quiet.”
(With files from Bloomberg)