Iron ore futures in China edged down in early trade on July 4, taking a breather after a five-day rally that pushed prices of the steelmaking raw material to their highest in more than five years.
The most-active iron ore contract on the Dalian Commodity Exchange, for delivery in September, slipped as much as 2% to 884 yuan/t ($128.64/t) shortly after the market opened, but was down just 0.2% by 0214 GMT.
Dalian iron ore prices have more than doubled this year as port stocks across China shrank to their lowest since early 2017 due to reduced shipments from top exporters Australia and Brazil, as well as robust demand.
Benchmark spot iron ore for delivery to China jumped 2.4% to $126.50/t on July 3, the highest since early 2014, data showed. Dalian iron ore hit a record-high of 911.5 yuan/t on the same day.
Weather disturbances and operational issues have prompted the world's biggest iron ore miners in Australia to lower their output and shipment estimates for this year, while supply from Brazil dropped in the wake of mine shutdowns by top producer VALE SA.
Increased purchases by steel mills have provided additional support to iron ore prices, as profit margins for steel production improved in June, a traditional off-season for steel demand, said Helen Lau, analyst at Argonaut Securities.
Steel prices rose in June amid output curbs in China's top steel-producing city of Tangshan. The number of blast furnaces dropped due to production controls, resulting in higher margins, she said in a note.
"Looking ahead, this production control is expected to strengthen further through summer," Lau said. "Therefore, the steel margin should continue to be well supported, which again will support iron ore prices in our view."
Prices for other steelmaking materials were mixed on July 4, with Dalian coking coal futures down 0.8% at 1,373 yuan/t, while coke futures rose 1.1% to 2,135 yuan/t.
Steel futures edged higher after a pullback from multi-year peaks.
The most-active October rebar contract on the Shanghai Futures Exchange rose as much as 0.8% to 4,074 yuan/t. The construction steel benchmark jumped to its highest in more than eight years on July 1 at 4,148 yuan/t.
Hot rolled coil, steel used in cars and home appliances, climbed as much as 0.6% to 3,929 yuan/t. It touched an all-time high of 4,049 yuan on July 1.
Source:sxcoal
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