Iron ore recovers as China steel holds

After what has been a tough quarter, iron ore is getting a reprieve. Benchmark spot prices have clawed their way back above $60 a tonne after rebounding from a one-year low as steel output holds up in China, buoying demand even as supply rises.

Spot ore with 62% delivered to Qingdao rose 4.4% to $62.33 a tonne, the highest in five weeks, according to Metal Bulletin. The gain followed a jump in futures, with the SGX AsiaClear contract rallying 4.1%, and the Dalian Commodity Exchange’s price holding gains. Mining shares advanced, including BHP Billiton and Rio Tinto Group.

The uptick in the commodity that took place this week pared losses in this quarter spurred by concern over rising production, especially of low-cost supply, and China reining in leverage. Premier Li Keqiang said on Tuesday Asia’s biggest economy was on track to meet growth targets. Steel coil and rebar in China are headed for gains in June after a multi-month run of losses.

“After the recent sell-off, iron ore is due for a rebound and is gaining favour with funds,” Maike Futures analysts Dang Man and Ren Jiaojiao said.

“An improvement in profit margins has incentivised steelmakers to sustain production,” they said.

Steel extended gains on Wednesday, with rebar (reinforcement-bar) futures closing 1.7% higher in Shanghai, and hot-rolled coil adding 1.2% to a three-month high.

Spot iron ore, which bottomed at $53.36 on June 13, remains 22% lower this quarter, the most since the final three months of 2015.

Miners climbed in Sydney. Rio Tinto rose 2.5% as BHP Billiton added 1.9%, with both stocks capping their fifth consecutive daily gain.

Fortescue Metals increased 4.1%, up for a third session. The company is Australia’s biggest exporter.