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China iron ore set for fifth weekly gain on strong demand outlook

Published 05/06/2020, 02:27 pm
Updated 05/06/2020, 02:30 pm
© Reuters.

* Dalian iron ore down 0.8% on day, SGX iron ore up 1.2%

* Global steel demand to fall 6% this year - worldsteel

By Enrico Dela Cruz

MANILA, June 5 (Reuters) - China's iron ore futures fell on Friday, but were poised for a fifth weekly gain on a buoyant demand outlook for the steelmaking ingredient in China and concerns over supply from key exporter Brazil.

Iron ore for September delivery on the Dalian Commodity Exchange DCIOcv1 closed the morning session down 0.8% at 747 yuan ($105.02) a tonne, but was up 2.5% for the week.

On the Singapore Exchange, however, iron ore for August delivery rose 1.2% to $94.10 a tonne.

"We feel iron ore's recent rally looks increasingly stretched, with strengthening headwinds in the steel industry likely to put downward pressure on prices in the coming months," said Daniel Hynes, a senior commodity strategist at ANZ.

Global steel demand is expected to fall 6.4% this year due to the COVID-19 pandemic's impact on industrial and construction activity, but bounce back next year, the World Steel Association (worldsteel) said on Thursday. China demand and concerns over the rising coronavirus cases in Brazil have driven spot prices for the steelmaking ingredient beyond $100 a tonne.

Benchmark 62% iron ore's spot price settled at $102 a tonne on Thursday, near a 10-month high, SteelHome consultancy data showed. SH-CCN-IRNOR62

Despite some doubts that the $100 per tonne price level is unsustainable as Brazil supply risks may ease eventually, analysts said a sudden pullback was unlikely given the upbeat outlook for Chinese steel demand.

"The recovery of (China's) steel demand will be more visible in the second half of 2020", driven by construction as Beijing has put forward new infrastructure initiatives, worldsteel said.

FUNDAMENTALS

* Construction steel rebar on the Shanghai Futures Exchange SRBcv1 slipped 1.1% and hot-rolled coil SHHCcv1 dipped 0.6%, while stainless steel SHSScv1 was virtually flat.

* Coking coal DJMcv1 dropped 1.2% and coke DCJcv1 lost 0.3%.

($1 = 7.1130 yuan)

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