Iron ore futures in China surged to their highest close in over five months on Wednesday, on hopes of strong restocking demand from mills ahead of local holidays.
The most active May contract for iron ore futures on the Dalian Commodity Exchange jumped as much as 2.85% to 685 yuan ($98.69) per ton in morning trade, before settling up 2.1% at 680 yuan, the highest close since Aug. 2.
“Steel mills in south and east China are restocking actively before the upcoming Spring Festival holiday… but inventories at northern mills are still at relatively low level,” Tianfeng Futures wrote in a note.
The futures house expects steel firms in northern China to replenish at least another 1.95 million tons of iron ore before China’s New Year holiday, which falls on Jan. 24.
Meanwhile, escalating tensions in the Middle East may weigh on prices for the steelmaking ingredient.
Iran launched a missile attack on U.S.-led forces in Iraq in early hours on Wednesday, in retaliation for the U.S. drone strike on an Iranian commander whose killing has raised fears of a wider war in the Middle East.
Market does not expect any big impact on iron ore supply due to limited output in that area.
“But the Middle East tension will affect oil prices, which may increase freight of iron ore shipments,” a Shanghai-based trader said.
Prices for spot cargoes of iron ore with 62% iron content for delivery to China rose to $95.5 per ton on Tuesday.
Other steel producing raw materials also gained, with Dalian coking coal ending up 1.5% at 1,207 yuan per ton and Dalian coke rising 1.3% to 1,909 yuan per ton.
FUNDAMENTALS
* Construction steel rebar on the Shanghai Futures Exchange, for May 2020 delivery, increased 1.3% to 3,617 yuan per ton, the highest since July 2.
* Hot-rolled coil, used in cars and home appliances, jumped 1.6% to 3,643 yuan per ton.
* Shanghai stainless steel futures, with front-month February contract, edged 0.1% lower to 14,135 yuan per ton.
* Global miner Anglo American Plc said on Wednesday it was in advanced talks to buy fertilizer maker Sirius Minerals for 5.5 pence per share, valuing the company at about 386 million pounds.
* China will do more to help small and medium firms get funding, the state council’s financial stability committee said after a meeting chaired by Vice Premier Liu He on Tuesday.
Source:Reuters
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