Iron ore firms on China pre-holiday restocking, demand uncertainty caps gains

Iron ore prices experienced an upward trend on Thursday, as Chinese steelmakers increased their seaborne purchases in anticipation of a national holiday. Despite the surge, concerns over shrinking steel mill margins dampened the demand outlook. The primary iron ore contract on China's Dalian Commodity Exchange (DCE) climbed 0.35% to 711 yuan ($105.94) per metric ton, while the benchmark October iron ore on the Singapore Exchange rose 0.26% to $96.05 per ton.

This price level has been hovering below the significant psychological barrier of $100 for six consecutive sessions.

Several steelmakers executed seaborne orders for the forthcoming week-long National Day holiday break, spanning October 1-7. The daily volume of seaborne transactions surged by an impressive 43% to 1.41 million tons on Wednesday, marking a notable increase from the previous day. According to data from consultancy Mysteel, this uptick in activity indicates heightened purchasing activity.

However, despite the rising prices, mills may be inclined to moderate their restocking efforts due to the declining margins. These reduced margins have discouraged mills from boosting production, which in turn has stifled potential price appreciation, according to analysts.

Furthermore, other steelmaking materials also witnessed a price increase. Coking coal and coke each gained 1.18% and 1.31%, respectively. Steel benchmarks on the Shanghai Futures Exchange also made advances. Rebar saw a 0.1% uptick, hot-rolled coil rose 0.24%, and stainless steel experienced a more substantial 0.78% increase.

Analysts from broker Zhengxin Futures commented on the situation, noting that although real steel demand has not shown clear indications of recovery, supply contraction continues due to mounting losses.