Iron Ore's Impressive Multi-Session Rally Followed by Subsequent Retreat

Iron ore futures experienced a decline on Thursday as traders chose to lock in profits, following an impressive streak of gains in Singapore prices – the longest rally seen since June. Similarly, the Dalian benchmark had enjoyed a 10-session advance. This shift came amid lingering concerns about China's economic slowdown and challenges within the property sector.

The September contract for the most-active iron ore on the Singapore Exchange witnessed a 1.4% decrease, settling at $111.65 per metric ton around 0818 GMT. Notably, this contract had seen a continuous rise over five sessions, reaching a peak for the past four weeks earlier in the day.

Meanwhile, the most-traded January iron ore on China's Dalian Commodity Exchange concluded daytime trading with a 0.9% dip, resting at 811 yuan ($111.39) per ton. This followed its earlier proximity to Wednesday's two-year peak of 832.50 yuan.

In the context of the week, Dalian and SGX iron ore had enjoyed approximately 7% and 5% increases, respectively. Spot prices also embraced four-week highs, fueled by China's commitment to policy support in order to invigorate its recovering economy, consequently uplifting risk-on sentiment.

The momentum of the rally was further supported by dwindling iron ore port stockpiles in China, a major steel producer. Additionally, the anticipation of heightened steel production in preparation for an upcoming surge in domestic construction activity from September to October contributed to the price surge.

However, experts suggested a dose of caution. Citi analysts emphasized that even with substantial incremental policy support from China, there would still be a time lag before the effects were realized.

Despite this caution, any potential decrease in iron ore prices could encounter limitations. This is especially true in the absence of definitive and recent guidelines from Chinese authorities regarding steel output limits for the year – a measure aimed at curbing carbon emissions.

Zhongzhou Futures analysts noted that the market might exhibit fluctuations until the production restriction policy is put into practice.

Across the board, several steel benchmarks in Shanghai and other related ingredients in Dalian experienced a slight retreat. Coking coal declined by 1.4%, while coke witnessed a 1.7% loss.

Rebar, shedding 1.2%, and hot-rolled coil, dropping 1.6%, were no exception to this trend. On the other hand, wire rod managed to climb by 2.9%, offering a notable contrast. Lastly, stainless steel dipped by 1.5%, completing the spectrum of movement in this dynamic market.

Source : Reuters (Reporting by Enrico Dela Cruz)