(July 6): Iron ore rose after China’s state-backed buyer of the commodity expanded curbs on Australian miner Fortescue Ltd and as a slump in prices over the last couple of months attracted buyers.
Futures for the steelmaking ingredient climbed as much as 1.2% to US$99 a tonne before paring gains. China Mineral Resources Group Ltd has asked several domestic steel mills and traders not to buy any new US dollar-denominated cargoes of Fortescue’s Super Special Fines product, escalating its dispute with the miner. Mounting restrictions on Fortescue have provided some support to the iron ore market in recent weeks.
A seasonal slowdown in Chinese demand and an increase in seaborne supplies have seen iron ore retreat around 12% from a peak in mid-May, although the market has stabilised over the last three weeks.
The rebound was likely driven by low valuations for the whole ferrous industry following the declines in prices, said Yu Dian, principal researcher at Citic Futures Co. The market also sees diminished expectations for a Federal Reserve rate hike and is anticipating additional Chinese policy stimulus, she said.
Even so, the broader iron ore market remains under pressure. A recent Australian government report forecasts the commodity will average US$91 a tonne this year and then fall to US$64 a tonne in 2031.
See also: Copper and aluminium advance on fading expectations for rate hike
“In terms of actual supply and demand, profits of Chinese steel enterprises keep shrinking, and there are expectations of weakening demand for coking coal and iron ore,” said Bancy Bai, an analyst at Horizon Insights in Shanghai.
Iron ore rose 0.4% to US$98.20 a tonne in Singapore as of 12.05pm local time. Futures in Dalian climbed 0.9% to 740.5 yuan a tonne, after being up as much as 1.4% earlier.
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