Iron ore and steel futures in China edged lower on Friday as investors locked in gains after a six-day rally anchored on firm demand and Beijing's bid to address a steel glut.
But prices of both commodities came off session lows, suggesting the bullish market sentiment was largely intact.
China has been cracking down on mills producing low-quality steel, those expanding operations illegally and those aggravating the country's pollution problem, helping tighten supply at a time when some traders are replenishing stocks in anticipation of demand staying strong through next year.
The most-active rebar on the Shanghai Futures Exchange closed down 0.5 percent at 3,345 yuan ($485) a tonne, but well off the day's low of 3,213 yuan.
The construction steel product gained 6.2 percent for the week after touching a 31-month peak on Wednesday.
Iron ore on the Dalian Commodity Exchange closed 2.6 percent lower at 618 yuan per tonne, having fallen more than 6 percent earlier. The steelmaking raw material hit a nearly three-year high on Thursday and rose 5.9 percent this week.
Data on Thursday showed China's iron ore imports jumped in November to the third highest on record at nearly 92 million tonnes.
"We think the likelihood of a sustained downturn in iron ore prices looks increasingly unlikely, with risks skewed to the upside over the next 12 months," Daniel Hynes, commodity strategist at ANZ Bank, wrote in a report.
"A combination of seasonally strong steel demand in China and risks of further supply disruptions could see the market enter a period of tightness in the second half of 2017, which should support prices."
The strength in futures this week propelled spot iron ore back above $80 a tonne to the highest since October 2014. Iron ore for delivery to China's Qingdao port stood at $81.78 a tonne on Thursday, a day after touching a two-year high, according to Metal Bulletin. It has risen over 5 percent this week.
Source: Reuters |
