Iron ore held at its highest level in nearly four months on Wednesday as stocks at China’s ports dropped for the eighth consecutive week, helping entrench a recent recovery in prices.
Spot iron ore prices have rebounded 37 percent since touching a 10-year low of $46.70 a tonne in April. Falling port inventory has reflected firm demand among Chinese mills replenishing low stockpiles.
Futures of the steel-making commodity in Singapore and China jumped on Wednesday, with iron ore in Dalian hitting its highest since March.
Sucden Financial analyst Kash Kamal said the sustained decline in stocks of iron ore at China’s ports “will offer support to spot prices in the coming weeks.”
But traders said the pace of buying has slowed compared with recent weeks.
“The available choice of cargoes for some mills is still rather limited, but I don’t think they’re in a rush to buy now,” said an iron ore trader in Shanghai.
Iron ore for immediate delivery to China’s Tianjin port climbed 1.9 percent to $65.10 a tonne on Wednesday, the highest since Feb. 16, according to The Steel Index (TSI).
“The current rally has been more about short-term supply bottlenecks to do with disruptions at Brazil ports and the Atlas closure. In the second half we are going to see more Australian material coming onto the market,” said Caroline Bain, senior commodities economist at Capital Economics.
Inventory of imported iron ore at China’s ports fell to 83.8 million tonnes as of June 5, according to consultancy SteelHome, which tracks the data. The port inventory, which has fallen 17.5 percent this year, is at its lowest since November 2013.
Among steel mills covered in a survey by Chinese consultancy Mysteel, the average inventory level of iron ore has dropped to 20 days of consumption from an average of 23 days in the first quarter, Goldman Sachs said in a report on Monday.
“Although the decline in inventory is relatively modest, the Chinese steel industry was operating with a lean supply chain that minimizes working capital, but that exposes steel mills to unexpected supply disruptions,” Goldman Sachs said.
The most-traded September iron ore contract on the Dalian Commodity Exchange closed up 3.3 percent at 450.50 yuan ($73) a tonne, just off a session high of 451 yuan, its loftiest since March 18.
Source: Reuters