Iron ore gains on China import surge, yearly volume rises

Iron ore futures gained on Tuesday following data showing that China’s imports last month surged to 101.3m tonnes, the second-highest on record after September 2017. 

Yearly volume in 2019 also increased 0.5% from the previous year to hover just below the all-time annual peak, boosted by a second-half recovery in shipments from big miners after disruptions in Brazil and Western Australia earlier in the year.

In addition, Beijing’s stimulus projects to avoid a sharp economic slowdown also led to robust demand from a resilient property market and the infrastructure sector, helping to boost iron ore imports.

Mill demand was strong as steelmakers restocked ahead of a restart in activity after the Chinese New Year holiday in January.

According to data from Mysteel, utilisation rates at 247 mills across China stood at 77.6% last week. The recent rally in iron ore prices also weighed on China’s appetite for high-grade iron ore this winter as steel mills try to reduce costs and prop up profit margins.

On the supply side, with Brazil’s Vale SA resuming operations at some mines and other big miners increasing production, however, analysts and market participants expect a rise in overall iron ore supply this year. The most active iron ore contract for May 2020 delivery on Dalian Commodity Exchange (DCE) gained 8.5 yuan to close at 671.5 yuan per tonne.

In Singapore, Q2 traded 90.1 early in the session. Feb was seen trading over a dollar higher at 94.5 to 95.05. Spreads-wise, Feb/Mar was seen trading 1.3 and Mar/Q2 at 3.3. After the close, Feb was seen trading 94.75-95.05 while Mar also traded 93.7. Sizable chunk of Feb/Mar also went through several times at 1.3.