Iron ore jumps on China brisk demand

Iron ore futures extended a bullish run as sentiment remained positive buoyed by signs of strong demand in top consumer China. Dalian iron ore price climbed to the highest in over three weeks as a rebound in steel inventory in the Asian powerhouse suggested that demand for the raw material remained rapid.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange ended 5.9 per cent higher at 1,247 yuan ($195.19) a tonne, registering a second consecutive weekly rise after touching its highest since May 19 at 1,248 yuan.

Concerns over tight global iron ore supply also supported prices as China’s iron ore port inventory hit a four-month low the previous week, while weekly shipment arrivals fell. Adding to supply concerns, Vale SA, the world’s largest iron ore producer, suspended production at two mines and decommissioned a dam over safety concerns. This, commodity analysts assert, could further delay the recovery in iron ore output in Brazil.

According to S&P data, shipments from Rio Tinto, BHP, Vale, Fortescue Metals Group and Roy Hill, and Saldanha port in South Africa, reached 99.41 million tonnes in May, the highest level so far in 2021, up 7.8 per cent month on month and a 3 per cent increase year on year.

The commodities information provider however noted that despite an improvement in Iron ore exports from top producers recorded in May, Rio Tinto and Vale will need to lift run rates over the second half of 2021 to meet their sales guidance.

“Over January-May, Vale exported iron ore at an annualized run rate of 251.7 million tonnes, indicating it is far off meeting guidance and taking into account it sells around 25 million tonnes of iron ore into the Brazilian market,” S&P Global Platts stated.