Chinese iron ore prices climbed for a fourth session on January 8 after hitting a 10-week peak a day earlier, supported by restocking demand at steel mills.
"Steel mills generally don't have strong incentives to ramp up output due to thin margins and weak demand," said Zhuo Guiqiu, analyst at Jinrui Futures.
"But some steel mills in Tangshan and Xuzhou city that restarted operations after emergency measures were lifted still need to replenish their stocks of raw materials."
Authorities in some cities, including the steelmaking hubs of Tangshan and Xuzhou, asked mills to curtail output in December to make sure of meeting targets on cutting pollution for the year.
Some steel mills have reopened after the new year.
Profit margins for rebar have fallen more than 66% since late October to 300 yuan/t ($43.77/t) this week, while hot-rolled coil is only just profitable, according to data compiled by Jinrui Futures.
Zhuo expected more steel mills could schedule maintenance until the end of China's week-long national new year holiday in mid-February.
Utilization rates at steel mills across China fell for a seventh consecutive week last week as of January 4 to 64.23%, the lowest level in 9-1/2 months, data showed.
The most-active iron ore futures on the Dalian Commodity Exchange rose 0.8% to 513.5 yuan/t as of 0209 GMT.
However, steel futures eased after rising for three consecutive days, as investors hope for a direct stimulus package from Beijing.
Benchmark construction steel rebar prices dipped 0.1% to 3,493 yuan/t, while the hot-rolled coil contract edged up 0.5% to 3,399 yuan/t.
Despite current weak demand, ongoing trade talks between China and the United States helped to support market sentiment, as investors hope the two parties can reach a deal to halt the bruising trade war.
Source:sxcoal
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