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Iron ore pushes higher as Shanghai steel futures jump over 3%

Credit: REUTERS/CHINA STRINGER NETWORK

Iron ore jumped on Thursday, despite renewed government focus on commodity inflation in top steel producer China, as benchmark steel futures in Shanghai stretched gains, lifting prices of steelmaking raw materials.

By Enrico Dela Cruz

June 10 (Reuters) - Iron ore jumped on Thursday, despite renewed government focus on commodity inflation in top steel producer China, as benchmark steel futures in Shanghai stretched gains, lifting prices of steelmaking raw materials.

The most-traded iron ore for September delivery on China's Dalian Commodity Exchange DCIOcv1 ended the morning trade 0.9% higher at 1,180 yuan ($184.84) a tonne.

July iron ore on the Singapore Exchange SZZFN1 rose 1.5% to $207.90 a tonne.

The overall sentiment was positive with spot iron ore prices also extending gains, supported by strong fundamentals, analysts said.

The benchmark 62% iron ore traded at $213 a tonne on Wednesday, the highest since May 19, based on SteelHome consultancy data, although buying interest was stronger in lower-grade but cheaper materials as steel profit margins in China have recently narrowed.

"We're already seeing reports surface that mills in China have a reduced preference for higher‑grade ore with steel mill margins down 75-85% from peaks in mid‑May," said Vivek Dhar, commodities analyst at Commonwealth Bank of Australia.

"As steel mill margins remain low, and possibly weaken further, we expect this preference to become more prevalent."

Market participants appeared unperturbed by China's state planner's vowing to step up monitoring of commodity prices and strengthen supervision of spot and futures markets.

China's central bank governor Yi Gang said the country's annual average inflation was expected to be below 2% this year, though he cautioned against both inflationary and deflationary pressure amid economic and macro policy uncertainty.

On Thursday, China's commerce ministry said it was paying close attention to "the difficulties and challenges faced by foreign trade companies in raw material prices, exchange rate fluctuations and freight rates".

Construction steel rebar on the Shanghai Futures Exchange SRBcv1 rose as much as 3.4%, while hot-rolled coil SHHCcv1 jumped as much as 3.5%. Stainless steel SHSScv1 advanced 1.5%.

Dalian coking coal DJMcv1 gained 0.9%, while coke DCJcv1 climbed 1.2%.

(Reporting by Enrico Dela Cruz in Manila, additional reporting by Min Zhang in Beijing and Sonali Paul in Melbourne; editing by Uttaresh.V)

((enrico.delacruz@thomsonsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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