China’s iron ore futures rose to a near four-week peak on Monday, buoyed by tight supply amid low inventories at ports and expectations of restocking demand at steel mills ahead of the holiday season.
The benchmark iron ore contract on the Dalian Commodity Exchange climbed as much as 2.3 percent to 492 yuan ($71.30) a tonne, a level not seen since Nov. 22, before closing 1.6 percent higher at 488.50 yuan a tonne.
Stocks of the steelmaking ingredient at China’s major ports added 900,000 tonnes last week to stand at 137.1 million tonnes as of Monday, SteelHome data showed, but were 4.5 percent lower than a year earlier.
“With falling shipments from miners… fundamentals of iron ore have improved a lot,” Huatai Futures’ analysts said in a note, adding that steel mills would soon start their restocking process ahead of the Chinese New Year. “Iron ore prices are expected to rise alongside the rebound in steel prices,” they added.
The week-long Lunar New Year holiday in China will be observed in early February 2019.
Imported iron ore inventories at 64 steel mills across China surveyed by consultancy Mysteel last week dipped to their lowest level since early November 2017.
However, analysts warn that strengthening environmental measures may rein in iron ore demand in the near term.
The major Chinese steelmaking cities of Tangshan and Xuzhou have asked mills to curtail more output over the remainder of December as city officials are concerned that they may not meet their pollution reduction targets for the year.
Steel mills in Tangshan were ordered to raise average production curbs to 40 percent from 30 percent, while Xuzhou plans to shut down all its mills.
Weekly utilisation rates at steel mills across China continued to dip last week, declining 0.13 percentage points from the previous week to 65.75 percent, with the rate in Tangshan city slipping to its lowest in four months at 58.1 percent, Mysteel data showed.
Meanwhile, the most-active construction steel rebar futures on the Shanghai Futures Exchange rose as much 1.3 percent in early trade on Monday to its highest since Dec. 6 before trimming gains to close 0.2 percent higher at 3,435 yuan a tonne.
Among other steelmaking raw materials, coke closed up 0.4 percent at 2,028 yuan a tonne in Dalian, while coking coal ended down 0.6 percent at 1,242 yuan a tonne.