Iron Ore Prices Rise Amid Positive China Factory Data

Iron ore, a crucial ingredient in steel production, has seen a rise in its futures prices recently, primarily driven by positive factory data emerging from China, the world's largest consumer of this vital resource. On Monday, the January iron ore contract on China’s Dalian Commodity Exchange (DCE) increased by 0.94%, reaching 803.5 yuan (approximately $110.67) per metric ton. Similarly, the benchmark January iron ore on the Singapore Exchange also experienced a modest gain of 0.41%, settling at $104.45 per ton.

This uptick in iron ore prices comes on the heels of encouraging news regarding China’s factory activity, which expanded at its fastest pace in five months during November. A private-sector survey indicated that new orders, including those from international markets, contributed to a significant rise in production levels. This positive trend was further corroborated by an official survey released on Saturday.

However, despite these optimistic indicators, analysts caution that the demand for iron ore is showing signs of weakening. Colder weather in northern China has disrupted construction activities, which in turn limits the potential for further price increases. According to data from consultancy Mysteel, the average daily hot metal output among surveyed steelmakers has decreased for the second consecutive week, falling by 0.8% to 2.34 million tons as of November 29.

Experts from Maike Futures predict that hot metal output may continue to decline in December, although they expect daily production to remain above 2.3 million tons. This output is a critical measure of iron ore demand, making these figures particularly significant for market observers.

Interestingly, some steelmakers have reportedly completed their procurement of seaborne cargoes to satisfy production needs following the week-long Chinese New Year Holiday break. However, they noted that stockpiling of portside cargoes has yet to commence, indicating a cautious approach to inventory management.

In addition to iron ore, other steelmaking ingredients on the DCE displayed mixed results. Coking coal prices dipped by 0.36%, while coke saw a slight increase of 0.11%. On the Shanghai Futures Exchange, most steel benchmarks showed positive movement, with rebar rising by 0.3%, hot-rolled coil advancing by 0.77%, and wire rod increasing by 0.52%. Conversely, stainless steel prices eased by 0.8%.

While the recent data from China presents a glimmer of hope for the iron ore market, the underlying issues of demand and seasonal disruptions cannot be overlooked. As the market navigates these complexities, stakeholders will need to remain vigilant and adaptable to the ever-changing landscape of global steel production and consumption. Understanding these dynamics is essential for anyone involved in the industry, as they can significantly impact pricing and availability in the months to come.