Iron ore futures jumped on Wednesday, as better-than-expected China manufacturing activity data raised hopes for a demand rebound in the world’s top steel producer.
The most-traded May iron ore futures contract on the Dalian Commodity Exchange (DCE) ended daytime trade 2.42% higher at 908.5 yuan ($131.64) a tonne, after closing about 0.8% lower in the previous session.
On the Singapore Exchange, the benchmark April iron ore was up 2.17% at $126.05 a tonne, as of 0703 GMT, extending gains.
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China’s manufacturing purchasing managers’ index (PMI)climbed to 52.6 last month, the highest reading since April 2012, up from 50.1 in the previous month.
“We believe the better-than-expected data has injected some confidence into the market. Also, the expectation of continued improvement in downstream (steel) demand lent support to the prices of raw materials including iron ore,” said Yu Chen, a Shanghai-based senior iron ore analyst at consultancy Mysteel.
Chinese steel mills are expected to replenish iron ore inventories to meet production needs after some mills resumed production, analysts from Huatai Futures said in a note, adding that the hot metal output had improved steadily.
Coke, one of steelmaking ingredients, also showed signs of strength. Coke DCJcv1 rose 1.86%, while coking coal DJMcv1 was little changed at 2,033.5 yuan a tonne.
Along with improved demand from downstream steel consumption sectors, strong raw material prices also lent support to the steel market.
Rebar on the Shanghai Futures Exchange SRBcv1 rose 1.1%, hot-rolled coil SHHCcv1 climbed 1.1% and wire rod SWRcv1 moved up 0.98%. Stainless steel fell 1.36%, though.
“Demand (for stainless steel) is typically lacklustre in the first quarter (of a year). Moreover, the comparatively high stocks in Wuxi and Foshan warehouses also weighed on prices,” said Ellie Wang, a Shanghai-based senior nickel analyst from consultancy CRU Group.
China revised its total crude steel output to approximately 1.018 billion tonnes for 2022, marking a year-on-year fall of 1.7%, NBS data released on Tuesday showed. Previously, it had reported 2022 output at 1.013 billion tonnes, down 2.1% year-on-year.
Source: Reuters (Reporting by Amy Lv and Dominique Patton in Beijing; Editing by Subhranshu Sahu)