Iron ore futures recouped early losses on Tuesday, with both Dalian and Singapore benchmark contracts resuming a rally on strong Chinese demand for the steelmaking ingredient. The most-traded iron ore for January delivery on China's Dalian Commodity Exchange ended daytime trade up 0.3% at 908.50 yuan ($138.38) a tonne. The most-active January contract on the Singapore Exchange gained 0.8% at $130.40 a tonne by 0717 GMT.
However, market enthusiasm over falling steel and iron ore stockpiles in China was tempered somewhat by an anticipated slowdown in winter demand in the world's top metals consumer, analysts said. China's steel inventories declined substantially from a seasonal record high of 12.92 million tonnes to just slightly above the five-year seasonal average of 10.46 million last week, OCBC Bank economist Howie Lee said.
Strong end-user demand and the recent shutdown of some plants in China's top steelmaking city of Tangshan may have led to the rapid drawdown in stocks, Lee said. Spot iron ore on Monday scaled the highest level since January 2014 at $131.50 a tonne, according to SteelHome consultancy. China's iron ore port inventories have declined for two consecutive weeks, after a five-month long stockpiling, Lee added. "Steel margins are comfortable at present and the breakeven parity for iron ore is currently estimated at $150 per tonne," he said.
Booming sales of fridges, toasters and microwaves to households across the world have helped propel China's mammoth manufacturing engine back to life, super-charging demand for steel.
