Iron ore futures soared on Monday after latest data indicated that China is recovering robustly from the coronavirus pandemic.
The Caixin/Markit Manufacturing Purchasing Manager for May came in at 50.7, better than both market estimates and the reading of previous month of 49.6 and 49.4 respectively, indicating that China is expanding faster than expected.
Meanwhile, the PMI for steel sector was at 50.9, up 5.0 as compared to April, as announced by the China Steel Logistics Committee. Meanwhile, Inventories of seaborne iron ore at Chinese ports continued to trend lower last week as arrivals from Australia and Brazil declined.
Latest figures show that iron ore stocks decreased 1.07 million mt in the week ended 29 May to 99.39 million mt. Market reacted to the news that Vale’s Itabira mine was to be shut down following a court order after 200 workers were tested positive for Coronavirus.
The court decision was later reversed but the ongoing supply concerns linger on and are showing no signs of abating as Brazil became the second most-infected nation. There are “growing concerns that it was a matter of time before Brazil’s iron ore output is disrupted,” said Commonwealth Bank of Australia’s Vivek Dhar.
Meanwhile, new air pollution curbs for the Tangshan region will be brought out in June which would potentially affect 35,000 tonnes of pig iron production.
Futures in Singapore traded as high as 99.4 in Asia, $3 higher compared to Friday’s close since retreated to mid-98 ahead of the London open. Iron ore futures were under pressure upon reopen with Q3 seen trading at 96.1 after reopen.
A mini sell-off, possibly triggered by some profit-taking activities saw Jun trading down from 101.00 to 100.00 during the London morning DCE session. Jul also traded at 97.0 and 97.25 while Q4 also traded at 89.2 and decent chunk at 89.25, lacking any sense of direction after the close.
(FIS)