Iron ore futures have seen a modest rise, recovering from recent lows, as Chinese steelmakers are increasing their purchases of seaborne cargoes in anticipation of the extended National Day holidays in early October. This pre-holiday restocking activity has led to a surge in daily trading volumes for seaborne cargoes, which jumped by 43% to 1.41 million tons on September 16 from the previous day. The most-traded iron ore contract on China's Dalian Commodity Exchange (DCE) rose by 0.35% to 711 yuan (approximately $105.94) per ton, while the benchmark October iron ore on the Singapore Exchange was up 0.26% at $96.05 per ton.
Despite this short-term gain driven by restocking, the overall demand outlook for iron ore remains subdued. End-use demand for steel in China is weak, exacerbated by a prolonged downturn in the property market, with new home prices continuing to decline in August. This has led to deteriorating profit margins for steel mills, pressured by high production costs and sluggish steel demand, prompting several Chinese steelmakers to pledge production curbs to reduce inventories.
Analysts indicate that while the pre-holiday restocking provides some support, the underlying weak demand and shrinking mill margins are expected to limit significant upward movement in iron ore prices. Iron ore prices are likely to remain in a narrow range with a weaker bias in the near term. The Federal Reserve's rate decision, while within market expectations, also continues to weigh on potential gains. Overall, the market is described as being caught between bullish and bearish sentiments, with no clear turning point in sight.
