Asia FX muted, dollar weakens slightly ahead of Fed rate decision
On Thursday, iron ore futures experienced a significant rise, buoyed by strong steel consumption data from China, the world’s largest consumer. This positive sentiment shifted investor focus toward the growing demand for ore and triggered a wave of short covering.
According to Reuters, the most-traded May iron ore contract on the Dalian Commodity Exchange (DCE) closed the daytime session 2.26% higher at 837 yuan ($115.15) per metric ton, reaching its highest point since October 8 at 838.5 yuan earlier in the day.
The benchmark March iron ore on the Singapore Exchange (OTC:SPXCY) also saw gains, rising 1.65% to $108.45 a ton by 0739 GMT, marking the highest level since February 14.
The surge in consumption for rebar, which is primarily used in the construction sector, contributed significantly to the uptick. As reported by consultancy Mysteel, rebar consumption jumped by 163% from the previous week to 1.69 million tons as of February 20.
Analysts from China and a trader based in Singapore, who remained anonymous due to not being authorized to speak to the media, indicated that the sharp increases in the ferrous market were mainly driven by steel consumption exceeding expectations.
This has renewed optimism that demand for steelmaking ingredients will increase in the coming weeks, potentially prompting steel mills to boost production.
Despite these gains, the market experienced some volatility in the morning trade due to uncertainties surrounding China’s potential implementation of additional stimulus measures. Authorities kept benchmark lending rates unchanged at the monthly fixing on Thursday, signaling a cautious approach to monetary stimulus to avoid adding further pressure on the yuan.
The rise in ore prices could provide temporary relief to major producers such as Rio Tinto (LON:RIO) (NYSE:RIO.AX), (RIO.L), BHP (BHP.AX), Fortescue (FMG.AX), and Vale (VALE3.SA), which have all reported sharp declines in profit in their latest earnings reports. These declines were attributed to falling prices, which were dragged down by China’s struggling property market.
Other steelmaking ingredients traded on the DCE also advanced, with coking coal and coke increasing by 2.89% and 2.62%, respectively. On the Shanghai Futures Exchange, steel benchmarks also moved higher, with rebar rising 1.24%, hot-rolled coil adding 1.02%, wire rod edging up 0.26%, and stainless steel gaining 1.15%.
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