Iron ore posts gains despite lingering demand concerns

Iron ore futures posted gains on Thursday as expectations of additional Chinese policy support ahead of next week’s Politburo meeting lifted market sentiment, while higher freight costs increased the delivered cost of seaborne cargoes. However, sluggish steel demand and cautious buying by mills continued to cap the market’s upside.

Renewed geopolitical tensions in the Middle East have pushed up energy and maritime shipping costs, increasing the delivered cost of imported iron ore into China.

Investors are also looking ahead to next week’s meeting of China’s Politburo, the country’s top decision-making body, for signals on economic policy in the second half of the year. Market analysts said expectations for additional measures to support economic growth and the property sector have increased following recent mixed economic data, although uncertainty remains over whether any new policies will be sufficient to boost steel demand.

Chinese traders said steel consumption remained subdued during the seasonal off-season, with demand from the construction sector continuing to soften. Although some mills have carried out blast furnace maintenance, production cuts have provided only limited support as weaker downstream demand has largely offset lower steel output.

Market insiders noted that inventories of imported iron ore at major Chinese ports have changed little in recent weeks, reflecting slower raw material consumption by steel mills. Meanwhile, inventories of major finished steel products held at commercial warehouses have started to increase again, reinforcing concerns over weak domestic demand.

Chinese steel traders said export activity remained generally stable, with most overseas offers changing only marginally. However, rapidly rising freight costs have made new export transactions more challenging. They added that the market is expected to remain range-bound until stronger demand signals emerge later in the third quarter.

On the Dalian Commodity Exchange, the most-traded September iron ore contract rose 0.74pct to 747.5 yuan (USD 110.3) per ton. Coking coal futures gained 1.22pct to 1,287.5 yuan (USD 190) per ton, while coke futures increased 1.07pct to 1,847 yuan (USD 273) per ton.

On the Shanghai Futures Exchange, rebar futures edged up 0.06pct to 3,085 yuan (USD 456) per ton. HRC futures rose 0.21pct to 3,291 yuan (USD 486) per ton. Wire rod futures declined 0.63pct to 3,300 yuan (USD 487) per ton, while stainless steel futures advanced 0.61pct to 14,855 yuan (USD 2,193) per ton.

1 USD / 6.77 yuan