Chinese iron ore prices posted on Friday their best weekly gain in four, as steel mills ramped up purchases amid low inventories and on hopes of better end-user demand when the severe weather conditions improve.
The most traded January iron ore on the Dalian Commodity Exchange ended 3 percent higher at 735 yuan ($107.10) a ton and up 6.4 percent on a weekly basis, on track for its biggest weekly gain since July 29.
On the Singapore Exchange, the most-traded October contract rose 2.5 percent to $105.60 a ton, and spot iron ore for delivery to China assessed by SteelHome were unchanged at $105.50 a ton on Thursday.
“Market is better than before. Now steel mills keep very low inventory. When the temperature drops, demand from end-users will come again … may be in 1-2 months. There will be more demand for raw materials,” a China-based trader said.
China has experienced record high and prolonged heat in many regions, dampening construction activities which consume a large amount of steel, while power curbs to preserve electricity also hurt industrial enterprises.
Authorities in China on Wednesday said it would increase funding support for infrastructure projects, which would boost steel demand, days after it cut rates, in efforts to revive an economy hurt by COVID-19.
“The stimulus helps with market confidence, which I think is very important. But it has its limitation,” said the trader, pointing out that steel demand is still pressured by COVID-19 resurgence and weak construction and manufacturing activities.