Iron ore futures contracts rebounded on Friday (19) after some positive news from China’s troubled real estate sector, but traders remained cautious about the outlook for general demand for raw material at the world’s largest steelmaker.
January’s most traded iron ore on the Dalian Commodities Exchange closed up 2.5% at RMB 536 ($84) a ton. The contract hit RMB 509.50 earlier in the day, the lowest since November 6, 2020, and marked its sixth consecutive weekly decline.
On the Singapore Stock Exchange, the iron ore contract for December was up 5.1%, to US$ 90.60 a ton, at 4:24 am (Eastern time).
“There has been a lot of positive news from Chinese property developers. It’s driven by sentiment, nothing has really changed,” said Atilla Widnell, managing director of Navigate Commodities in Singapore.
China Evergrande has resumed construction on 63 projects, while Country Garden Services Holding raised $1 billion from the sale of shares.
Concerns over the debt problems of Chinese developers, a sector that accounts for about a quarter of domestic steel demand, have recently increased pressure on iron ore and steel prices.
The spot reference price for 62%-grade iron ore in China was $90 a ton on Thursday, the lowest in 18 months, according to data from consultancy SteelHome.
Environmental restrictions, which forced Chinese steelmakers to restrict production this year, are expected to continue until after the Beijing Olympics in February, as authorities seek to clean up polluted skies.
“Despite continued cuts in steel production, weak demand has resulted in a lack of market balance, pushing steel prices and margins down,” said Richard Lu, senior analyst at CRU in Beijing.
“In addition, iron ore stocks have built up to a multi-year high.”
Construction steel rebar on the Shanghai Futures Exchange rose 2.2%, and hot-rolled coil rose 1.3%. Stainless steel gained 0.4%.
Coking coal in Dalian fell 0.7%, while coke rose 0.5%.
Reference: CNN Brasil
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