Iron ore futures rose for a second day amid demand optimism in the wake of robust output data from China and lower inventory levels.
Steel mills in China are ramping up production to benefit from elevated prices, with the nation churning out crude steel, putting China on track for record output this year. In another sign for a strong demand, stockpiles for rebar continued to drop, while iron-ore port inventories declined for the third consecutive week.
Chinese firms should boost domestic exploration for the steel-making input, widen their sources of imports, and explore overseas ore resources, the National Development and Reform Commission said at its monthly briefing. Despite the heightened government campaign to curb raw material prices, industrial commodities prices powered on, recovering much of their poise after last week’s pullback.
Mysteel expects single-digit growth for apparent steel consumption in China to persist past 2021 as a result of the nation’s medium-term urbanization targets, according to a note from UBS Group AG, citing a call with Henry Liu, head of iron ore analytics at the pricing and market intelligence service.
Iron ore futures in Singapore rose 3.2% to $214.15 a ton by 3:55 p.m. local time, after climbing 2.9% on Monday. Contracts in Dalian closed 3.8% higher, and rebar and hot-rolled coil futures edged higher in Shanghai
However, other risks to the rally may be looming as supply from Brazil could pick up in the coming months. Brazilian producers are looking to generate cash and make new investments to supply a tight market underpinned by robust China-led demand, according to the president of the country’s mining industry group Ibram.