Benchmark iron ore futures in China closed more than 4% higher on Tuesday, propped up by strong profit margins at mills, while record high crude steel output suggesting resilient demand for the steelmaking ingredient also boosted sentiment.
The most-traded iron ore contract on the Dalian Commodity Exchange, for September delivery, gained as much as 5.5% to 1,256 yuan ($195.26) per tonne before closing up 4.3% at 1,243 yuan.
“Steel consumption is still at seasonal peak in the short term… mills are actively producing driven by high profits, which is supporting raw materials,” analysts with Huatai Futures wrote in a note.
With mills cranking up production fuelled by strong profits, the world's top steel producer China churned out 97.85 million tonnes of the metal last month, data from the National Bureau of Statistics (NBS) showed on Monday.
Data tracked by Mysteel consultancy showed that iron ore shipments from Australia and Brazil fell by 2.24 million tonnes to 22.58 million tonnes last week.
Spot prices of iron ore with 62% iron content for delivery to China increased $3 to $211.5 a tonne on Monday, according to SteelHome consultancy.
China's state planner said it would take targeted measures to stabilise the ferrous market, and expects growth in factory-gate prices to ease in the second half as commodity prices return to taking cues from fundamentals.
Other steelmaking ingredients on the Dalian bourse were mixed, with coking coal dipping 0.1% to 1,968 yuan a tonne while coke increased 1.2% to 2,659 yuan a tonne.
The October contract for construction rebar on the Shanghai Futures Exchange edged down 0.2% to 5,610 yuan a tonne.
Hot rolled coils, used in the manufacturing sector, extended losses, closing 0.8% lower at 5,980 yuan per tonne.
Shanghai stainless steel futures rose 2.4% to 15,645 yuan a tonne.
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