Chinese iron ore prices surged nearly 5 percent to a three-week-peak on Monday, as market expected steel mills to replenish their stocks amid low inventory level.
Steel mills in the world’s largest iron ore consuming country have been slowing raw material purchases after a steep run-up in prices in February.
Stocks of imported iron ore at Chinese ports continued to climb last week as of March 3, to 146.05 million tonnes, their highest level since late September, data compiled by SteelHome showed.
“Although the restocking pace at steel mills may vary and no big range of purchase is expected, steel mills still need to bring in raw materials to support operation, which will back prices to go up,” analysts from Jinrui Futures wrote in a note.
Analysts also expect the rising steel prices amid increasing demand from downstream sectors to drive up raw materials.
The most-active iron ore contract for May delivery soared as much as 4.9 percent to 646.5 yuan ($96.58) a tonne when market opened on Monday.
It finished up 0.7 percent at 620.5 yuan a tonne.
Steel prices also rose, buoyed by concerns over tight supply as several cities in northern China ordered steel mills to trim output, an effort to clear their smog-filled skies.
Top steelmaking city Tangshan on Friday issued a level 1 smog alert, the highest in the country’s four-tier pollution warning system, asking mills to curb output by 40-70 percent or even stop production from March 1 to March 6.
Wu’an city, another major steelmaking hub in Hebei province, tightened its March anti-pollution rule, by asking steel mills to cut extra 10 percent of production on top of its original orders, at an aim to improve its air quality, according to a statement from the city government.
Benchmark construction rebar prices on the Shanghai Futures Exchange rose 0.9 percent to 3,811 yuan a tonne.
Hot-rolled coil futures edged up 0.1 percent to 3,791 yuan a tonne.