Iron ore up on robust China demand

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Dalian and Singapore iron ore futures rose on Tuesday, as spot prices of the steelmaking ingredient held firm near 10-month highs on robust demand from China’s steel mills as they continued to ramp up output.

Iron ore on China’s Dalian Commodity Exchange rose as much as 1.5 percent to 784.50 yuan ($110.92) a ton while the Singapore Exchange’s benchmark contract gained 2.2 percent to $102.70.

Weekly production of construction material rebar by 137 Chinese steelmakers reached 3.99 million tons over June 4-10, according to a Mysteel survey, hitting the highest level since the consultancy began its survey in 2015.

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China’s crude steel output jumped 8.5 percent from a month earlier in May, hitting the highest ever on record, lifted by a construction boom fuelled by an infrastructure-led recovery program for the coronavirus-hit domestic economy.

“As this recovery momentum will continue to be sustained… we expect China’s commodity demand will see further improvement,” said Helen Lau, analyst at Argonaut Securities.

But some analysts warned of near-term headwinds, such as the rainy season onset in southern China, which will likely slow construction activity, and a potential rise in coronavirus infections, which could slow economic recovery.

“Market risks have continued to rise. Both China and the United States are facing the threat of the second round of the epidemic,” analysts at Huatai Futures said in a note.

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