Iron ore powers higher as China's clean-air push boosts demand

Futures on the Dalian Commodity Exchange surged 5.5%, the most in a month, while the most active SGX AsiaClear contract headed for a three-month high, rising 3.8% to $71.85 a metric ton by 4:18 pm in Singapore. The benchmark price for spot ore with 62% content delivered to Qingdao increased 3.1% last week to $71.50, according to Metal Bulletin.

The commodity has rebounded since the start of November. While China’s bid to curb pollution by cutting steel supply this winter is hurting overall consumption of ore, it’s supporting demand for higher-quality material because the variety is more efficient to use.

Demand for ore could also expand next year as rising profits encourage steel mills to increase production and furnaces in the top supplier ramp up after the end of winter curbs. 

“Tighter supply of some material has bolstered prices in the short term,” Chinese brokerage Shanghai Cifco Futures said in a note on Monday. “As traders’ bids to purchase the raw material have remained steady, some suppliers are seeing more bargaining power.”

Miners’ shares benefited from the rally. Rio Tinto’s stock added 1.2% in Sydney, while BHP Billiton climbed 2%. Fortescue Metals Group, which tends to produce lower-quality ore, was up less than 1%. Steel reinforcement bar futures rose 1.3% in Shanghai after two weeks of losses, while hot-rolled coil added 0.4%.