China: Positive Sino-US trade talks boost DCE iron ore futures

• Rising hot metal output supports futures uptrend
• Strong market fundamentals to keep tags elevated

Mysteel Global: China’s derivatives markets for major ferrous products, including rebar, iron ore, and coke, all recorded gains on Monday, after the trade talks between China and the United States in Geneva over the weekend ended on a positive note, lifting market sentiment.

Significantly, the most-traded iron ore contract for September delivery on the Dalian Commodity Exchange (DCE) led the increase by closing Monday’s daytime trading session higher by a marked 3.16% from the settlement price last Friday, exchange data show.

The strong futures prices reflected the upbeat sentiment among market players, as the trade talks between China and the United States over the weekend had made “substantial progress”, according to China’s official news agency, Xinhua.

Indeed, on Monday afternoon, the world’s two largest economies jointly announced that they will temporarily slash the “reciprocal tariffs” that they imposed on each other’s goods.

Prior to the trade talks, iron ore prices in China had been range-bound, with concerns mounting over the US tariff hikes and China’s crude steel output controls, while demand for the feed material from steelmakers was relatively strong.

Hot metal output among Chinese steelmakers has kept rising during the past few weeks, as mills are still actively producing while they chase healthier profits, market observers said. Mysteel’s monitoring of the 247 Chinese integrated steelmakers it regularly samples showed that about 59% of them – or some 145 producers – could make profits when selling their steel on 8 May, with the ratio being higher by 3 percentage points w-o-w and by 7 percentage points y-o-y.

Although the summer lull for steel consumption is looming and mills’ production is peaking, demand for iron ore will stay resilient for a while before any steep decline in the hot metal output occurs, an iron ore analyst based in Shanghai said.

“Now that the downside risks to iron ore prices from US tariffs have eased, the strong fundamentals and trade optimism will together support iron ore prices in the near term,” she added.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.