China iron ore futures soar for a third day

Source:Reuters-Global Times Published: 2017/8/21 18:03:39

The high-grade supply will be in shortage until mid-Sep: analyst

China's iron ore futures rose for a third day on Monday, soaring more than 6 percent, fueled by concerns over shortages of high-grade iron ore and before curbs on futures purchases come into force.

The Dalian Commodities Exchange on Friday said it will limit the daily purchases and sales of contracts for delivery in January and February to 6,000 lots from Tuesday.

The January contract is currently the most-active iron ore future on the exchange. Each lot is 100 tons of ore.

"Administrative methods cannot change the imbalanced supply and demand situation," said Wang Yilin, an analyst at Sinosteel Futures.

The most-active iron ore futures on the Dalian Commodities Exchange climbed  6.8 percent to 597 yuan ($89.53) a ton on Monday. The contract rose as high as 598.5 yuan, the highest level since March 21 this year.

Iron ore futures have climbed 13.7 percent over the past three sessions, the biggest three-day percentage gain since the three days ending November 25, 2016.

Mills are churning out steel products with high-grade iron ore ahead of production curbs that are set to start before the beginning of the northern hemisphere winter.

Hebei, the top steel producing province in North China, said it will impose capacity limits on steel mills in three cities, including Tangshan, during the winter season in an effort to tackle pollution.

"Margins on long- and flat-products are good at mills, which support them in keeping full-load operation and purchasing more raw materials, even when prices are hiking," said a supply manager at State-backed steel firm in Central China's Henan Province.

Analysts estimated that profits on steel products are now between 600 yuan a ton and 1,000 yuan a ton.

"It is unlikely to see the supply gap on high-grade iron ore  be filled until the middle of September, when the September contract approaches delivery," said Wang. "No one wants to deliver at current price level."

The most-traded rebar futures on the Shanghai Futures Exchange rose more than 4.1 percent at 3,981 yuan a ton.

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