Iron ore futures experienced a notable increase on Monday, driven by robust demand in China, the world’s largest consumer of this crucial steelmaking ingredient. The May iron ore contract on the Dalian Commodity Exchange surged by 2.43%, closing at 779.5 yuan ($107.45) per metric ton. Concurrently, the benchmark April iron ore on the Singapore Exchange rose by 2.29%, reaching $102.2 a ton.
According to consultancy Mysteel, production among independent electric-arc-furnace (EAF) steel producers in China witnessed a further uptick this week, reflecting a sustained recovery in domestic steel demand. Data from Mysteel indicated that the average capacity utilization rate for EAF mills climbed for the sixth consecutive week, reaching 54.9%, the highest level since June 2024. Additionally, hot metal production, often used as an indicator of iron ore demand, saw a significant month-on-month increase, with strong ongoing demand for manufacturing steel, as noted by broker Galaxy Futures.
In the backdrop, Chinese Premier Li Qiang emphasized the need for countries to open their markets in a bid to combat rising instability and uncertainty, especially as China prepares for further tariffs from the U.S. Analysts from ANZ suggested that steel production could face challenges from these tariffs and potential capacity cuts. To address these issues, Beijing is contemplating the establishment of funds to facilitate a compensation system aimed at phasing out outdated steel capacity. Despite these uncertainties, iron ore imports are expected to remain strong due to seasonal restocking, according to ANZ.
Other key ingredients for steelmaking also experienced gains on the Dalian Commodity Exchange, with coking coal rising by 1.13% and coke increasing by 2.97%. Most steel benchmarks on the Shanghai Futures Exchange also showed positive trends, with rebar increasing by 1.23%, while stainless steel dipped slightly by 0.15%.