Iron ore contracts hit record high

Iron ore futures in China rose nearly 6%, to a record high since contracts were launched in 2010, driven by an outlook for strong demand from steel mills.

The most active contract for the supply of iron ore in September on the Dalian Mercantile Exchange climbed 5.8% to 710 yuan ($ 102.87) per tonne, the highest level since July 2010.

“Investors expect stable demand for steelmaking raw materials despite high prices as mills will ramp up production amid strong profitability,” said a Shanghai-based trader.

The average profit from rebar production fell to RMB 600 per tonne from RMB 840 per tonne in mid-April.

Utilization at steel mills across China rose 0.28 percentage points to 69.06% as of May 17 from the previous week, according to data compiled by consultancy Mysteel, despite tightening pollution control measures at the main steel mill. Tangshan city of China.

The Tangshan government has ordered steel mills to increase production caps to an average of 30% in May from about 20% in April.

High iron ore prices were also supported by supply problems in the wake of the mine accident, which could lead to a wide range of safety checks across the country.

An iron mine in northeastern China was flooded early Friday morning, trapping nine people underground. The mine, which began operations in February, has an annual production of 1.6 million tonnes.

Meanwhile, Brazilian iron ore miner Vale SA told prosecutors in the state of Minas Gerais that there was a danger of a dam bursting at its Gongo Soko mine, located about 40 miles from where its Brumadinho Dam collapsed, killing more than 230 people.

However, analysts and traders have warned that restocking at steel mills could slow as demand for steel begins to wane.

Steel traders' inventories continued to decline this week to 11.62 million tonnes, with rebar declining 350,300 tonnes and hot rolled coil 82,700 tonnes, according to Mysteel.

Shanghai Core Rebar Index rose 1.3% to 3,771 yuan a tonne when the market closed at 07:00 GMT, while hot rolled coil rose 1.1% to 3,682 yuan a tonne.

Other raw materials for steel production also rose on Friday: coking coal added 1.8% and coke added 1%.