Iron ore futures dipped on Monday, retreating from six-month peaks, though Shanghai steel benchmarks held firm in the wake of a major shift in China’s COVID-19 containment policy.
The most-traded May iron ore on China’s Dalian Commodity Exchange ended morning trade 0.3 percent lower at 806.50 yuan ($115.55) a ton.
Dalian iron ore climbed to 823 yuan a ton on Friday, its strongest since June 15, as top steelmaker China’s easing of COVID-19 restrictions lifted hopes of a revival in demand.
On the Singapore Exchange, the steelmaking ingredient’s benchmark January contract was down 1.8 percent at $109.55 a ton.
“Iron ore futures rallying to close at $111.75/t on Friday is yet another poignant example of just how much heat and overly positive sentiment is currently built in to the current pricing structure,” said Navigate Commodities Managing Director Atilla Widnell.
Iron ore at above $100 a ton seems “overvalued” currently, he said, but “the longer prices persist above this level there’s an increasing likelihood the pricing-floor may start to move higher”.
With miners undertaking seasonal maintenance programs in the first quarter of 2023, he said supply is likely to drop. That may support iron ore prices, along with an improved outlook for Chinese demand.
