China's iron ore futures continued to rise on May 20 after recording their best weekly performance in six weeks, buoyed by expectations of a robust near-term demand at steel mills amid strong profitability.
The most-traded iron ore futures on the Dalian Commodity Exchange climbed as much as 2.9%, hitting an all-time high of 715.5 yuan/t ($103.67/t).
"Investors expect steel mills to accept even higher iron ore prices as mills are keen to ramp up more output to cash in on fat profit margins," said a Beijing-based trader.
Average margin on rebar-making is around 600 yuan/t, while they are 370 yuan/t on hot-rolled coil.
Inventory of imported iron ore at Chinese ports has fallen to 131.7 million tonnes as of May 20, its lowest level since mid-October in 2017.
A weakened yuan, undermined by escalating trade tensions between the United States and China, also helped to support iron ore prices.
"We expect steel mills to replenish their iron ore stocks soon and it will drag port inventory to around 120 million tonnes in June," said analysts from Huatai Futures.
However, analysts also warn of weakening steel demand in summer season, which would crimp profitability at mills.
Benchmark Shanghai rebar prices stayed little changed at 3,769 yuan/t as of 0200 GMT.
Hot-rolled coil futures fell 1% to 3,645 yuan/t.
Dalian coking coal contract edged up 0.2% to 1,384 yuan/t, while coke futures were flat at 2,153.5 yuan/t.
Source:sxcoal
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