Iron ore futures in China climbed for a second consecutive session on Monday, 5th June 2017, rising 2 percent, as recent rapid losses spurred restocking demand among steel producers. But a sustained drop in Chinese steel prices pulled the steelmaking raw material off session highs, suggesting any further gains may be limited. Shanghai rebar futures fell for an eighth day in a row.
“The divergence between steel and iron ore has been pronounced in recent weeks; driven in part by steel mills easing back on restocking earlier this year,” ANZ analysts said in a note. “However, with prices back below $60/tonne it may have been low enough to entice traders back.”
Traders say plentiful supply of iron ore could cap any upward momentum in prices. Imported iron ore at China’s ports stood at 136.55 million tonnes as of June 2, only down slightly from the previous week’s 136.6 million tonnes which was the most for the stockpiles since 2004, based on data compiled by SteelHome consultancy.
Weaker steel prices may also limit Chinese steel mills’ appetite to replenish their iron ore inventory. The most-active rebar on the Shanghai Futures Exchange ended 3.9 percent lower at 2,939 yuan a tonne, just off the session’s trough of 2,938 yuan, it’s weakest since May 15.