BEIJING: Dalian iron ore climbed for a second straight session on Tuesday,
supported by a persistent rise in steel prices in top consumer China, although
lingering doubts on demand prospects amid a lack of forceful stimulus capped
gains.
The most-traded January iron ore contract on
China’s Dalian Commodity Exchange (DCE) traded 0.85% higher at 708 yuan
($99.05) a metric ton, as of 0257 GMT.
The benchmark September iron ore on the Singapore
Exchange was, however, 0.4% lower at $94.25 a ton, following a rally on Monday
and a stronger US dollar. Steel benchmarks on the Shanghai Futures Exchange
posed further gains, boosting sentiment and supporting prices of key
steelmaking raw materials including iron ore. Rebar added 1.09%, hot-rolled
coil advanced 0.82%, wire rod gained 0.8% and stainless steel edged up 0.15%.
But analysts doubted the sustainability of a price rise, citing that
fundamentals remained unfavourable and a lack of fiscal stimulus has blurred
demand prospects in coming months. Supply pressure of the key steelmaking
ingredient has somewhat eased, but there is still no sign of improvement in the
demand side and the July data showed downstream steel demand has not improved,
according to analysts at Galaxy Futures.
“The reduction in ore demand outpaced supply,
making it hard to sustain a balance between supply and demand,” analysts at
Sinosteel Futures said in a note, adding that mills showed more interest in
lower grade ore amid thin margins.
China left benchmark lending rates unchanged at
a monthly fixing on Tuesday, in line with market expectations. “Beijing’s
reluctance to deploy massive fiscal stimulus measures is likely to subdue
demand for the foreseeable future,” ANZ analysts said in a note. Other
steelmaking ingredients on the DCE were mixed, with coking coal falling 0.9%
while coke strengthened 1.73%.