Iron ore rises as Chinese demand mitigates production cut risks
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Iron ore futures recorded notable gains on Monday, driven by robust demand dynamics in China, the world’s largest consumer. This upward momentum effectively offset market apprehensions concerning anticipated steel production restrictions in the region.
The actively traded May iron ore futures on China’s Dalian Commodity Exchange (DCE) closed 2.43% higher at 779.5 yuan ($107.45) per metric ton. Similarly, the benchmark April contract on the Singapore Exchange increased by 2.29% to reach $102.2 per ton, reflecting strengthened international sentiment.
A significant driver behind this rise is increased production activity among China's electric-arc furnace (EAF) steel producers. Mysteel consultancy data reported that capacity utilization rates among EAF mills reached 54.9%—the highest level since June 2024—marking six consecutive weeks of growth. Galaxy Futures further underscored this strength, noting considerable month-on-month increases in hot metal production, a key indicator of iron ore demand, alongside sustained robust manufacturing demand.
Despite positive short-term demand indicators, steelmakers remain cautious about the impact of potential tariffs and mandated capacity reductions. Analysts from ANZ highlighted that impending U.S. tariffs and strategic domestic industry restructuring initiatives by Beijing could introduce significant market headwinds. China's recent parliamentary discussions emphasized the elimination of obsolete steel capacity, although specific reduction targets remain undisclosed. CITIC Pacific Special Steel’s Chairman, Qian Gang, confirmed that China is considering establishing compensatory mechanisms for capacity removal, potentially reshaping the competitive landscape.
However, ANZ analysts anticipate iron ore imports will remain resilient in the short term, driven by seasonal restocking behaviors typical of Chinese industry practice.
In related commodities on the DCE, coking coal gained 1.13%, and coke notably increased by 2.97%, signaling broad-based strength across key steelmaking inputs. On the Shanghai Futures Exchange, steel product benchmarks also demonstrated gains: rebar rose 1.23%, hot-rolled coil increased by nearly 1.3%, and wire rod was up 1.44%. Stainless steel slightly declined by 0.15%, underscoring selective investor positioning within the steel sector.
Investors should continue to closely monitor policy developments and tariff negotiations, which could materially influence iron ore and steel market trajectories
The actively traded May iron ore futures on China’s Dalian Commodity Exchange (DCE) closed 2.43% higher at 779.5 yuan ($107.45) per metric ton. Similarly, the benchmark April contract on the Singapore Exchange increased by 2.29% to reach $102.2 per ton, reflecting strengthened international sentiment.
A significant driver behind this rise is increased production activity among China's electric-arc furnace (EAF) steel producers. Mysteel consultancy data reported that capacity utilization rates among EAF mills reached 54.9%—the highest level since June 2024—marking six consecutive weeks of growth. Galaxy Futures further underscored this strength, noting considerable month-on-month increases in hot metal production, a key indicator of iron ore demand, alongside sustained robust manufacturing demand.
Despite positive short-term demand indicators, steelmakers remain cautious about the impact of potential tariffs and mandated capacity reductions. Analysts from ANZ highlighted that impending U.S. tariffs and strategic domestic industry restructuring initiatives by Beijing could introduce significant market headwinds. China's recent parliamentary discussions emphasized the elimination of obsolete steel capacity, although specific reduction targets remain undisclosed. CITIC Pacific Special Steel’s Chairman, Qian Gang, confirmed that China is considering establishing compensatory mechanisms for capacity removal, potentially reshaping the competitive landscape.
However, ANZ analysts anticipate iron ore imports will remain resilient in the short term, driven by seasonal restocking behaviors typical of Chinese industry practice.
In related commodities on the DCE, coking coal gained 1.13%, and coke notably increased by 2.97%, signaling broad-based strength across key steelmaking inputs. On the Shanghai Futures Exchange, steel product benchmarks also demonstrated gains: rebar rose 1.23%, hot-rolled coil increased by nearly 1.3%, and wire rod was up 1.44%. Stainless steel slightly declined by 0.15%, underscoring selective investor positioning within the steel sector.
Investors should continue to closely monitor policy developments and tariff negotiations, which could materially influence iron ore and steel market trajectories