Iron ore futures prices rebounded on Wednesday, as some investors closed their short positions to cash in profits, although anticipation of seasonally slower demand capped gains.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) traded 0.72 per cent higher at 700 yuan ($97.41) a metric ton, as of 0300 GMT, after hitting a nearly two-month low the day before.
The benchmark July iron ore on the Singapore Exchange was 0.21 per cent higher at $94.5 a ton, as of 0250 GMT.
Prices have fallen dramatically in the past few days, leaving futures prices at a level lower than spot prices, which means limited downside room for futures in the near term, said Steven Yu, senior analyst at consultancy Mysteel.
“That has propelled some shorts to wind up their positions as hot metal output is likely to hover around 2.4 million tons in June; a more drastic price fall will only show up until fundamentals deteriorate further,” Yu added.
Average daily hot metal output, a gauge of iron ore demand, dipped by 0.7 per cent from the prior week to 2.42 million tons as of May 30. This is 2.6 per cent higher than the same period a year before, Mysteel data showed.
Pei Hao, a senior analyst at international brokerage Freight Investor Services, believes the bounce in ore prices is somewhat driven by the rally in coal and coke prices overnight.
Other steelmaking ingredients, coking coal and coke, rallied by around 3 per cent earlier in the session after touching nearly nine-year lows on Tuesday.
Steel benchmarks on the Shanghai Futures Exchange posted gains. Rebar added 0.48 per cent, hot-rolled coil gained 0.69 per cent, wire rod advanced 0.55 per cent and stainless steel ticked 0.28 per cent higher.