BEIJING: Chinese iron ore futures is on track to post the biggest daily gain in more than three weeks as investors bet on persistent tightness at port inventories supporting prices.
The most-traded iron ore futures on the Dalian Commodity Exchange jumped 2.7 percent to 425 yuan($68.53) a tonne by midday, the highest intraday gain since April 27.
Some investors who bet on a price slump have closed their short positions after prices hit a two-week low on Wednesday, leading to a technical rebound for the contract, analysts said.
“The bearish sentiment has faded since yesterday afternoon, though shipment will be increasing since late May, at least for now, prices for port stocks remain firm given the limited availability,” said Xia Junyan, an analyst with Everbright Futures in Shanghai.
However, some traders expected increased cargoes from Australia in late May and June and weak steel demand in the world’s top producer would keep a lid on prices for the raw material.
Iron ore for immediate delivery to China’s Tianjin port fell for the seventh straight session on Wednesday, down 1.0 percent at $57.80 a tonne, its lowest since May 4, according to the Steel Index.
Separately, the most-active rebar futures on the Shanghai Futures Exchange climbed 1.2 percent to 2,347 yuan a tonne by midday, after a seven-day losing streak.
But the persistent weakness in the world’s second-largest economy will continue to pressure steel demand, unless the government rolls out more stimulus to bolster the economy and the property sector.
Chinese factory activity contracted for the third month in May and output shrank at the fastest rate in just over a year, a survey showed, indicating the world’s second-largest economy is still losing momentum.
