Dalian and Singapore iron ore futures advanced on Thursday, as restocking and speculative buying underpinned spot prices in top steel producer China, but doubts remain on the sustainability of a recovery in demand for the steelmaking ingredient.
The most-traded iron ore, for delivery in January next year, on China's Dalian Commodity Exchange (DCIOcv1) ended daytime trade 2.3% higher at 741 yuan ($109.98) a tonne.
On the Singapore Exchange, the front-month September contract (SZZFU2) was up 3% at $113.15 a tonne, as of 0700 GMT.
Benchmark 62%-grade iron ore's spot price for the China-bound material settled at $111 a tonne on Wednesday, up 11% from the year's low at $100 last touched on July 21, according to data from consultancy and industry news provider SteelHome. (SH-CCN-IRNOR62)
Steel mills have restarted some of their idled blast furnaces in recent days, encouraged by improved margins and a pickup in demand from the construction sector.
But the medium-term demand outlook for steel products and ingredients remains clouded by several issues, such as mandatory steel output cuts in China aimed at curbing emissions, a financial crisis engulfing Chinese property developers and COVID-19 lockdowns.
Providing some relief to investors, Chinese developer Longfor Group Holdings (RLF) denied rumours that it had missed a payment on commercial paper.
Analysts said rebounding prices of raw materials driven by steel demand recovery could eventually restrain Chinese steelmakers from ramping up output.
“It is still doubtful whether the (downstream) demand for finished products can sustain… production resumption,” analysts at Sinosteel Futures said in a note.
Construction steel rebar on the Shanghai Futures Exchange (SRBcv1) advanced 0.7%, while hot-rolled coil (SHHCcv1) gained 0.6%. Stainless steel (SHSScv1) rose 0.8%.
Other steel inputs traded lower, with Dalian coking coal (DJMcv1) down 0.3% and coke (DCJcv1) dropping 0.8%.
Dalian coke had climbed to a near five-week high on Tuesday, also propped up by increased downstream demand.
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