Iron ore futures climbed for a sixth straight session on Tuesday, driven by mounting concerns over supply prospects from the giant Simandou project in Guinea, coupled with expectations of improving demand in China.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trade 2.03% higher at 805 yuan ($112.98) a metric ton.
It touched the highest level since July 25 at 814 yuan earlier in the session.
The benchmark October iron ore on the Singapore Exchange was 1.64% higher at $107.15 a ton, as of 08:00 GMT. The contract hit its highest level since February 25 at $107.65 earlier.
Rio Tito could be forced to build a refinery for the Simandou ore project in Guinea, Australia’s Financial Review reported on Sunday.
The giant iron ore project, with an annual production capacity of 120-million metric tons and first shipment expected in November, was seen weighing on prices in the coming years.
But the Guinea government’s intention to process ore locally may reduce the availability of ore being exported, supporting prices, said one analyst and one trader.
Focus is also on the pace of production resumption in the peak season in China and the corresponding restocking needs for raw materials, analysts at broker Shengda Futures said.
Steel mills, which had curbed production for a military parade in Beijing on September 3 to commemorate the end of World War Two, have gradually resumed production from September 4.
Hot metal output was expected to pick up to a relatively high level this week, supporting ore demand, analysts at Jinrui Futures said.
However, shrinking margins and the accumulated steel stocks may suppress mills’ buying appetite, said Shengda analysts, capping the rise in prices.
Coking coal and coke, other steelmaking ingredients, slid 1.66% and 1.21%, respectively.
Most steel benchmarks on the Shanghai Futures Exchange advanced. Hot-rolled coil climbed 0.42%, wire rod ticked up 0.12%, stainless steel gained 0.43% while rebar was flat.
