Iron ore extends gains above $192 on optimism over China demand

In a positive sign, iron ore inventories at major ports plunged to their lowest levels for the year. PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - Iron ore topped up its biggest weekly gain in 13 weeks as traders tracked China's moves to rein in Covid-19 restrictions, which have weighed on steel demand this quarter.

Futures in Singapore crept higher on Monday morning (June 6) after surging more than 7 per cent last week on optimism over China's plans to get the economy moving again after sweeping lockdowns.

The Beijing authorities said the capital will resume public transport in most districts, restart dine-in restaurant services and allow workers to return to offices. This comes after the city achieved zero new community cases in most of its 16 districts.

The steel-making ingredient shot through US$140 (S$192) a tonne last week after spending most of May fluctuating at around US$130 a tonne.

Investors are tracking what is next for demand after a terrible period for construction and manufacturing activity. There are expectations for more infrastructure spending.

In a positive sign, iron ore inventories at major ports plunged to their lowest levels for the year, reaching an eight-month low, according to Steelhome data. Margins for steel making are expanding again after shrinking to a 15-month low in May.

Still, investors will likely await firmer signs that China's cities will not move back into lockdowns again given the country's Covid-19-zero policy.

Also, any production curbs on steel will be monitored after an earlier pledge for output to drop again this year, Baocheng Futures wrote in a note.

Iron ore in Singapore rose 0.7 per cent to US$143.75 a tonne as at 11.48am local time to head for its highest close in a month.

Futures in Dalian climbed 1.1 per cent after a trading pause for a public holiday on Friday. Steel rebar and hot-rolled coil futures advanced in Shanghai.

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