Key Takeaways
- Iron ore prices increased for a second session.
- Chinese steelmakers are boosting seaborne purchases before a national holiday.
- Steel mill margins are shrinking, limiting price gains.
Iron ore prices rose for a second consecutive session on Thursday, driven by increased seaborne purchases by Chinese steelmakers ahead of a national holiday. The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE) increased by 0.35% to 711 yuan ($105.94) a metric ton, as of 0147 GMT.
The benchmark October iron ore on the Singapore Exchange was 0.26% higher at $96.05 a ton, as of 0137 GMT, remaining below the key psychological level of $100 for six consecutive sessions.
Several steelmakers have booked seaborne cargoes for the upcoming week-long National Day holiday break, which runs from October 1 to 7. According to consultancy Mysteel, the daily transaction volume of seaborne cargoes surged by 43% to 1.41 million tons on Wednesday from the previous day.
However, analysts caution that shrinking steel mill margins may limit the upward momentum of iron ore prices. Zhengxin Futures analysts noted that 'the real steel demand has not shown clear signs of recovering, missing earlier expectations, but supply contraction persisted as losses exacerbated.'
Other steelmaking ingredients also saw gains, with coking coal and coke prices up by 1.18% and 1.31%, respectively. Steel benchmarks on the Shanghai Futures Exchange also advanced, with rebar adding 0.1%, hot-rolled coil ticking up 0.24%, and stainless steel jumping 0.78%.
Despite the increase in seaborne purchases, analysts suggest that mills may slow their restocking as reduced margins discourage increased output, curbing potential price increases. This cautious approach is expected to keep iron ore prices from reaching higher levels.
