A truck is loaded with iron ore at a port in Nantong, Jiangsu province May 5, 2013. REUTERS/China Daily

By Manolo Serapio Jr

MANILA (Reuters) – Iron ore futures in China surged to their strongest level in two years on Monday, supported by a rally in steel prices and a drop in stocks of the steelmaking raw material in Chinese ports after a seven-week increase.

Stronger futures should lift spot iron ore further above $60 a tonne after scaling the highest since May on Friday. Chinese data showed iron ore imports in July by the world’s top consumer were the second highest on record.

A truck is loaded with iron ore at a port in Nantong, Jiangsu province May 5, 2013. REUTERS/China Daily

“Good profit margins for Chinese steel mills have kept them active in the iron ore market,” Australia and New Zealand Banking Group said in a note, adding that prices were also supported by a slight fall in inventories held at Chinese ports.

The most-traded September iron ore on the Dalian Commodity Exchange rose as far as 504.50 yuan a tonne, the highest since Aug. 28, 2014. It was up 2.9% at 500.50 yuan by midday.

On the Shanghai Futures Exchange, construction steel product rebar was up 3.6% at 2,594 yuan per tonne, after peaking at 2,602 yuan earlier, its loftiest since April 26.

Inventories of iron ore at major Chinese ports dropped 300,000 tonnes to 105.75 million tonnes on Aug. 5, after a seven-week gain that lifted the stockpiles to the most since December 2014, according to data tracked by The Steel Index.

China imported 88.40 million tonnes of iron ore in July, up 8.3% from the previous month, customs data showed.

That was the second highest imports of the raw material by China on a monthly basis, only trumping the record 96.27 million tonnes reached in December 2015.

“I’m not really surprised because a lot of overseas suppliers wanted to increase their shipments to take advantage of the price recovery,” said Helen Lau, analyst at Argonaut Securities in Hong Kong.

“At the same time prices were not high enough to incentivise domestic production to resume so it provides a market for imported iron ore,” said Lau.

Iron ore for delivery to China’s Tianjin port surged 3.4% to $60.90 a tonne on Friday, the highest since May 4, The Steel Index said.

Futures for other steelmaking raw materials also rallied on Monday, with Dalian coke soaring by its 7% limit and Dalian coking coal climbing nearly 5%. Hot-rolled coil in Shanghai jumped 3.8%.

(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)

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