Supply, inflation concerns send China iron ore, steel prices to record high

BEIJING (Reuters): China’s ferrous prices took off on Monday, with benchmark iron ore and steel futures hitting all-time highs amid robust demand and supply concerns, as expectations of rising inflation rates also fuelled speculative buying.

Capacity utilisation rates of blast furnaces at 247 steel mills across China jumped to 90.59% last week, the highest since early March, data from Mysteel consultancy showed.

The most active iron ore futures contract on the Dalian Commodity Exchange, for September delivery, soared 10% to a record high of 1,326 yuan ($ 206.30) per tonne. On the Singapore Exchange, the June iron ore contract surged 9.5% to $ 224.65 a tonne.

“Some mills have stopped buying at such high prices, but traders are sweeping up in the spot market,” said Wu Shiping, analyst with Tianfeng Futures.

Iron ore prices gained amid falling portside inventories while demand at mills remains strong, said a trader at a state-backed company, declining to be named as he is not authorized to talk to media. Iron ore stockpiles at Chinese ports fell by 2.05 million tonnes to 131.05 million tonnes, the lowest in almost two months, according to Mysteel. Spot prices of iron ore with 62% iron content for delivery to China stood at $ 212 per tonne on Friday, data compiled by SteelHome consultancy showed.

“At present, market participants are trading iron ore derivatives like cryptocurrency...not based on fundamentals, just pure momentum,” Navigate Commodities Managing Director Atilla Widnell said. Dalian coking coal rose 8% to 2,062 yuan a tonne at close. Coke futures gained 4.4% to 2,954 yuan. Steel prices on the Shanghai Futures Exchange and in the spot markets were also supported by the rising material costs.

Billet prices in the Tangshan city steel hub rose by 280 yuan a tonne over the weekend, said a CITIC Securities note.

Meanwhile, a raft of measures by Beijing since Friday tightening controls on steel capacity and production have stoked supply-side worries for the industrial material amid strong downstream consumption.

Construction steel rebar, for October delivery, rose 6% to 6,012 yuan a tonne, its all-time high. Hot rolled coils, used in cars and home appliances, also punched its trading limit and ended at a record 6,335 yuan per tonne.

Shanghai stainless steel futures, for June delivery, gained 2.6% to 15,295 yuan per tonne.

“Despite the jump in China’s steel prices, the metals are still cheap in the global market,” a Tianjin-based trader said.