Rising Iron Ore: China’s Strong Market Support and Record Imports

Ads

The price of iron ore in China is experiencing a significant rise, backed by strong support from the underlying market. Iron ore futures contracts traded on the Dalian Stock Exchange witnessed a surge in gains on Wednesday, signaling optimism among investors regarding short-term demand, despite low inventory levels. This positive sentiment propelled the most actively traded iron ore in Dalian to finish the day’s trading with a 2.12% increase, reaching 866 yuan per metric ton. This is the highest recorded price since September 25th.

In line with this upward trend, analysts from Shengda Futures highlighted that although the production of hot metals has recently declined, the rate of decline is relatively slow. Moreover, the current production levels remain relatively high for this period. They predicted that daily production of hot metals is likely to decrease to 2.42 million tons by the end of October, but will subsequently recover to approximately 2.45 million tons, providing robust support for steel raw materials.

The comprehensive data released by the customs authority revealed that China’s iron ore imports have surged to an all-time high of 876.65 million metric tons during the first nine months of 2023. This figure sets a new record for the country, underscoring the solid demand for iron ore. Furthermore, Rio Tinto (LON:RIO), the world’s largest producer of iron ore, reported a 1.2 percentage point increase in its shipments during the third quarter due to enhanced production at the Gudai-Darri mine.

The positive outlook in the iron ore market is not limited to the steel industry alone. The demand for aluminum has also witnessed improvement, thereby supporting investor optimism. Data provided by the consulting firm Mysteel indicates a surge in daily transaction volumes for aluminum products used in construction, reaching 208,200 metric tons on Tuesday. This level marks the highest recorded since May, signifying a rebound in the aluminum sector.

These developments highlight the resilience of the iron ore market in China, as both local and international factors contribute to its steady rise. The ongoing robust demand, coupled with the gradual recovery of production levels, bode well for the steel industry’s reliance on raw materials. Furthermore, reinforced demand for aluminum further facilitates a positive market sentiment, encouraging investors to capitalize on this upward trajectory.

Investors are also reassured by the stability of the iron ore market, as the recent increase in prices is not solely the result of short-term demand spikes. Instead, it stems from the solid support provided by the underlying market conditions. The slow decline in hot metal production signifies a controlled adjustment rather than a sudden disruption, underscoring the stability of the overall industry.

Looking ahead, industry experts remain cautiously optimistic about the future prospects of the iron ore market in China. While uncertainties persist in global trade and geopolitical landscape, the resilience exhibited by the market thus far instills confidence. The consistent demand, record-breaking import figures, and improved production rates lay a firm foundation for the growth and stability of the iron ore industry in the months to come.

In conclusion, the iron ore market in China is experiencing a substantial rise supported by the underlying market. The positive sentiment among investors, driven by short-term demand and low inventory levels, has propelled prices to the highest levels seen since September. Strong demand for iron ore, as evidenced by record-breaking import figures and increased production rates, further supports this upward trend. Additionally, the improved demand for aluminum contributes to investor optimism. With stable market conditions and positive outlook, industry experts anticipate the iron ore market in China to maintain its growth and stability moving forward.