(Bloomberg) -- Iron ore’s on the rise as an environmental cleanup in China tightens the supply of higher-grade material that’s less polluting and allows steelmakers to maximize production.
Futures on the Dalian Commodity Exchange surged 5.5 percent, the most in a month, while the most active SGX AsiaClear contract climbed 4.5 percent to a three-month high of $72.35 a metric ton in Singapore. The benchmark price for spot ore with 62 percent content delivered to Qingdao increased 3.7 percent to $74.15 a dry ton, the highest since September, according to Metal Bulletin Ltd.
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 Co. 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. Top producer Vale SA was up as much as 2.4 percent in Sao Paulo after Rio Tinto (LON:RIO) Group’s stock rose 1.2 percent in Sydney and BHP Billiton (LON:BLT) Ltd. climbed 2 percent. Fortescue Metals Group Ltd., which tends to produce lower-quality ore, added 0.8 percent. Steel reinforcement bar futures gained 1.3 percent in Shanghai after two weeks of losses, while hot-rolled coil added 0.4 percent.
(Updates with Vale shares in last paragraph.)
