Friday saw iron ore prices zoom to a new seven week high, putting in a fourth straight weekly gain, as hopes about a recovery in steel demand fostered speculation on Chinese markets. Dalian futures also rose, almost hitting $700 intrasession while rebar bounced back. However, reports that stockpiles of imported iron ore rose above 156 million tonnes at the end of last week – the highest since July 2018 – is likely to temper speculation into the new trading week.
ANZ reckon commodity markets are “normalising” following very high volatility due to power shortages and “shifting Chinese regulatory measures”.
For the steel market, in particular, the stabilising construction activity in China also helped lift the overall mood, they said.
“This supports steel demand, though the backdrop remains challenging for iron ore until February 2022,” they wrote in a note.
With China expected to ensure smog-free skies while hosting the Winter Games in February, tight steel production controls are likely to remain in place next year, putting a cap on iron ore demand.
China’s iron ore port stockpiles, partly due to weaker offtakes from steel producers, may thus continue piling up.