Iron ore rises as Chinese blast-furnace activity expands
Iron ore futures rose as Chinese blast furnaces and coke ovens increased capacity utilization. Higher steel exports, easing concerns over coking-coal supply and elevated freight rates also supported prices.
Dalian contract gains 1.32%
Iron ore futures advanced on Thursday as rising blast-furnace activity in China pointed to stronger demand from steelmakers. Signs that restrictions on domestic coking-coal supply may be easing, together with elevated seaborne freight rates and stronger Chinese steel exports, provided additional support to the market, InfoMoney reported.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange ended the daytime session 1.32% higher at 726.50 yuan ($108.15) per tonne. The October iron ore benchmark on the Singapore Exchange was up 2.17% at $99.40 per tonne.
Furnace utilization increases
Daily satellite-based thermal monitoring of 288 blast furnaces and 365 coke ovens across China showed that both sectors had steadily increased capacity utilization since August 25, according to Atilla Widnell, managing director of Navigate Commodities. Higher utilization indicates that steel producers are operating more equipment and therefore require more iron ore and coke.
The improvement coincided with a recent correction in Dalian coking-coal futures. Widnell said the move suggested that restrictions on domestic supply, caused by increased scrutiny and safety inspections at mines, could be easing. Better availability of coking coal can reduce a constraint on blast-furnace production because both coke and iron ore are essential inputs in conventional steelmaking.
The data provide evidence of a near-term recovery in raw-material consumption, but they do not by themselves establish how long the rise in furnace activity will last. Sustained iron ore demand will depend on whether steel mills maintain higher utilization and whether finished-steel sales can absorb the additional production.
Exports and freight support the market
China’s total steel exports increased 7.8% from the previous week to 2.55 million tonnes in the week ended August 31, according to Mysteel. It was the third consecutive weekly increase and the highest level in almost eight weeks. Compared with the same period a year earlier, exports were 23.9% higher.
The export increase gives Chinese mills another outlet for production and can support demand for iron ore when domestic steel consumption is insufficient. For international buyers and competing producers, the figures also signal a larger volume of Chinese material reaching overseas markets. The source material did not provide a breakdown by steel product or destination.
Seaborne freight rates remained elevated and supported iron ore costs, analysts at Chinese brokerage GF Futures said in a note. Mysteel data showed that freight rates on major routes to China rose on Wednesday. Higher shipping costs generally lift the delivered price of seaborne ore, reinforcing the upward pressure created by stronger furnace operations. Together, the furnace, export and freight indicators explain the latest price rise, although the durability of the move will depend on continued steel output and sales.