Iron ore futures in China jumped nearly 5 percent on Wednesday, tracking a similar spike in steel prices, with declining steel inventories indicating firm demand as Beijing sustains a campaign to curb excess supply.
The most-traded iron ore contract on the Dalian Commodity Exchange closed up 4.6 percent at 477.50 yuan ($69) a tonne, recovering further from Monday’s four-month low.
Rebar on the Shanghai Futures Exchange rose 4.3 percent to end at 3,110 yuan per tonne, its biggest single-day increase since Jan. 10.
Inventory of steel products held by Chinese traders had fallen 17 percent this year to 11.2 million tonnes as of May 12, said Argonaut Securities analyst Helen Lau.
“Therefore, the underlying real steel demand remains healthy,” Lau wrote in a note.
Along with China’s efforts to tackle a glut, analysts said demand was expected to improve, especially for long steel products for construction.
China said on Monday that 31.7 million tonnes of steel capacity had closed so far this year, 63 percent of the target for 2017. That comes on top of Beijing’s earlier pledge to shut all producers of low-quality steel products by the end of June as it fights pollution.
Still, China produced a record 72.78 million tonnes of crude steel in April.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 0.6 percent to $61.17 a tonne on Tuesday, according to Metal Bulletin.
Meanwhile, Hong Kong-listed IRC Ltd said it was considering restarting its 1.1-million tonnes per year iron ore mine in the far east of Russia, the latest sign of revival in a sector shaking a years-long downturn.
Yaang Pipe Industry Co., Limited (www.yaang.com)