Iron ore price up despite gloomy demand outlook

The most-traded September iron ore contract on China’s Dalian Commodity Exchange ended wobbly daytime trade 1% higher at 736 yuan ($109.90) a tonne. The benchmark contract has slumped 11% this week, its steepest since mid-February.

After consecutive losses, prices rebounded on Thursday after Chinese President Xi Jinping pledged to take more effective measures to achieve the country’s economic and social development goals.

Xi’s remarks also buoyed the spot market, with the benchmark 62%-grade iron ore bound for China trading at $117.50 a tonne on Thursday. It had dropped to $112.50 the day before, the lowest since December 10, according to SteelHome consultancy data. 

While “market confidence has been restored to a certain extent”, Sinosteel Futures analysts said the absence of any additional and specific economic stimulus measures from Beijing will limit any price gains for now.

In China’s steel production hub, Tangshan city, 56 of the 126 blast furnaces were shut for maintenance, according to Sinosteel, as mills struggled to cope with slumping margins amid weak demand and high inventories.

Covid-19 restrictions, which have put downward pressure on the property sector, and disruptions to construction activity caused by unfavorable weather are additional headwinds for China’s mammoth steel sector.

(With files from Reuters)