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China iron ore futures bounce back after five-day slide on firmer steel prices

2018-01-19 10:11:54

Reuters - Global Times

  Chinese iron ore futures edged higher on Thursday as firmer steel prices helped the raw material rebound after a five-day slide, with coking coal prices also recovering.
 
  Restrictions on steel production in northern Chinese cities during winter have dented demand for iron ore and dragged prices lower.
 
  But Commonwealth Bank of Australia analyst Vivek Dhar expects iron ore prices to rise as the curbs, in place since mid-November, are to be lifted by mid-March.
 
  "While we expect iron ore prices to trend higher this quarter, price volatility should be significant," Dhar said.
 
  At the close, the most-traded iron ore contract for May delivery on the Dalian Commodity Exchange rose 1.4 percent at 537 yuan ($83) a ton. The contract hit a two-and-a-half-week low of 525.5 yuan on Wednesday.
 
  Coking coal rose 0.7 percent to 1,283 yuan a ton and coke climbed 1 percent to 1,971 yuan, both rebounding after a six-day tumble.
 
  While China's steel production restrictions have hit demand for iron ore, prices of the raw material have been largely resilient as they tracked gains in steel prices which have risen due to the output curbs.
 
  With the curbs expected to be lifted by March, margins at steel mills could slip.
 
  "Steel mill margins have declined steeply on the back of falling steel prices in China. With steel margins contracting, iron ore markets could face a sharp price correction in coming months," Dhar said.
 
  Iron ore for delivery to the Port of Qingdao in East China's Shandong Province fell 1.6 percent to $74.51 a ton on the same day, its weakest level since December 29, according to Metal Bulletin data.
 
  "Seasonal demand for steel is normally low in winter so we see steel prices heading down despite the production cuts," said a trader in Shanghai, referring to the recent decline in Chinese steel prices.
 
  Shanghai rebar has lost more than 6 percent since hitting a three-month high of 4,104 yuan on December 4.