Iron Ore's Strength Continues into Second Week Amidst Easing Near-Term Demand Concerns

Iron ore futures experienced a delightful back-to-back weekly surge on Friday, driven by the reassuring news that steel mills in China's prominent steel-producing province have yet to reduce their output. This positive trend persists, despite some lingering uncertainties regarding long-term demand.

The January iron ore contract, the most active on China's Dalian Commodity Exchange (DCIOcv1), enjoyed a spirited climb of 2.94%, reaching 771.5 yuan ($105.87) per metric ton. This marks its seventh consecutive session of gains. Similarly, on the Singapore Exchange, the benchmark September iron ore contract (SZZFU3) extended its upward trajectory, recording a 0.8% rise to $106.5 per ton as of 0715 GMT.

During the previous night, Singapore iron ore futures leaped up by an impressive 5.1%, while their Dalian counterparts surged by up to 3.5%.

"Iron ore prices soared robustly on the back of the uplifting news that steel mills in Hebei province have not yet enacted production cuts," stated the National Australia Bank in a commentary, although a degree of caution remains due to the projected capping of China's steel production at 2022 levels.

The reduction in iron ore exports from Australia and Brazil has led to a tightening of iron ore supplies in China, as highlighted by ANZ in a briefing.

According to the most recent Mysteel survey, the inventories of imported iron ore sintering fines held by 64 Chinese steelmakers dwindled to 8.7 million metric tons by August 16. This reflects a 2.1% decrease from the previous week and a substantial 31% decline compared to the previous year.

Numerous mills have chosen to scale back their iron ore purchases, prompted by the increasing possibility of steel production controls and tighter margins on steel sales, as observed by Mysteel Global.

Meanwhile, China's eminent developer, Evergrande (3333.HK), has taken the step of seeking bankruptcy protection in a U.S. court, which has added to concerns of a ripple effect within the property market.

On the Shanghai Futures Exchange, market dynamics played out with the most-active rebar contract (SRBcv1) experiencing a slight 0.1% dip, while hot-rolled coil (SHHCcv1) managed to inch up by 0.1%. Simultaneously, wire rod (SWRcv1) experienced a minor 0.1% decline, and stainless steel (SHSScv1) showcased a commendable 0.7% gain.

Other crucial components of steelmaking, such as Dalian coking coal (DJMcv1) and coke (DCJcv1), witnessed impressive surges of 2.8% and 1.5%, respectively.

In a parallel development, the U.S. Commerce Department declared on Thursday its intention to impose initial anti-dumping duties on tin-plated steel imports from Canada, Germany, and China.

Source : Reuters (Reporting by Carman Chew)