Dalian iron ore futures experienced a modest increase on Monday, marking their first monthly rise in four months due to strong near-term demand in China, the world’s largest consumer of iron ore. The September iron ore contract on the Dalian Commodity Exchange concluded the daytime session at 715.5 yuan ($99.88) per metric ton, reflecting an increase of 0.21%. This contract managed to gain 2.06% in June, despite ongoing challenges from a persistent property crisis in China that tempered further gains. On the Singapore Exchange, the benchmark July iron ore price saw a decline of 0.16%, settling at $94.4 per ton and falling by 1.3% throughout the month.
Demand indicators, such as hot metal output, remained robust with approximately 2.42 million tons reported as of June 27, according to the consultancy Mysteel. Additionally, the average capacity utilization rate of blast furnaces rose slightly to 90.83% during the June 20-26 timeframe while non-manufacturing PMI data, which encompasses services and construction sectors, increased from 50.3 to 50.5. Despite some positives, manufacturing activity in China contracted for the third consecutive month in June, although at a slower rate. Analysts attribute this to weak domestic demand and the ongoing property crisis, leading factory owners to hold on to inventory as they await potential policy updates from Beijing regarding trade tensions with the U.S. and the EU.
Moreover, the U.S. dollar weakened as investors anticipated possible interest rate cuts, following comments from Federal Reserve Chair Jerome Powell suggesting that cuts could be forthcoming if inflation remains stable. This dip in the dollar value made dollar-denominated assets more affordable for international investors. Meanwhile, other steelmaking materials like coking coal and coke saw slight declines on the DCE. In contrast, various steel benchmarks on the Shanghai Futures Exchange witnessed minor increases, signaling some resilience in the sector.