Iron ore futures advance as easing trade tensions lift sentiment

Iron ore futures gained on Tuesday, supported by easing trade tensions between the U.S. and China and Beijing’s new proposal to curb steel overcapacity, which lifted overall market sentiment.

U.S. President Donald Trump and Chinese President Xi Jinping are set to meet in South Korea on Thursday, after officials from both sides agreed on a framework for a potential trade deal, a move that boosted optimism about avoiding a full-blown trade war between the world’s two largest economies.

Adding to the positive tone, China and the Association of Southeast Asian Nations (ASEAN) signed an updated free trade agreement, further strengthening regional cooperation.

Market sentiment was also supported by China’s proposal to restrict steel production capacity. While such curbs could theoretically lower iron ore consumption, analysts noted that reduced capacity may help limit oversupply, support finished steel prices and improve steel mill profitability. However, they cautioned that the impact would depend on strict policy enforcement, something that has been inconsistent in the past.

Despite the improved sentiment, steel market fundamentals remain fragile. Rising iron ore supply, weak steel margins, and environmental-related production curbs could prompt Chinese mills to advance maintenance schedules, dampening near-term ore demand.

On the Dalian Commodity Exchange, the most-traded January iron ore contract rose 1.93pct to 792.5 yuan (USD 110.6) per ton. Coking coal fell 0.76pct to 1,242 yuan (USD 175), and coke slipped 0.96pct to 1,747.5 yuan (USD 246) per ton.

On the Shanghai Futures Exchange, rebar gained 0.49pct to 3,091 yuan (USD 435) per ton, HRC rose 0.85pct to 3,305 yuan (USD 465), while wire rod and stainless steel both increased 0.51pct, reaching 3,341 yuan (USD 471) and 12,750 yuan (USD 1,796) per ton, respectively.

1 USD / 7.1 yuan