SHANGHAI, Sep 2 (SMM) – Iron ore prices on the Dalian Commodity Exchange (DCE) soared on Monday September 2, extending a rally from last Friday, as the official release of September’s environmental cuts in China’s top steelmaking hub of Tangshan came looser than expected and boosted market hopes of higher demand for feedstock iron ore.
The most-liquid DCE January 2020 contract surged to its 6% daily limit and closed at 630 yuan/mt on Monday September 2, with the October, November, and December contracts also rising a maximum 6% on the day.
Tangshan indeed loosened output restrictions on steelmakers for September than a month ago, according to a statement released over the weekend, following a draft plan on August 26 that suggested relaxed cutbacks.
The looser curbs are estimated to impact pig iron output by 1.28 million mt in September, less than the affected volume of 2.2 million mt in August, SMM calculations showed.
Iron ore arrivals across Chinese ports are expected to decrease this week on smaller arrivals of Australian cargoes despite greater deliveries from Brazil. This may also fueled the rally in iron ore futures prices.
The previous declines in iron ore prices improved margins at steel mills and drove up their demand for medium- to high- grade iron ore. This, together with limited availability of Australian high-quality ore, resulted in a rebound in prices, SMM believes.