Iron ore prices were boosted by hopes of an industrial recovery in China following data that showed improving activity in the country’s manufacturing sector.

Singapore iron ore 58% futures rose 3.8% on Monday, reversing earlier losses that took the prices nearly 4% lower, while futures on the Dalian exchange in China ended 3.8% higher. However, iron ore futures on the Chicago Mercantile Exchange (CME) fell 0.3%.

The catalyst for the gains in Asia appeared to be data from the latest purchasing manager index (PMI) survey on China’s manufacturing sector that showed further improvement in economic activity during the first quarter.

This was driven by greater inflows of new work, including from overseas, which helped increase production and levels of purchasing of raw materials. The March Caixin PMI rose to 51.1, up from 50.9 in the previous month, and marked the fifth-successive monthly improvement.

Dr. Wang Zhe, senior economist at Caixin Insight Group, said: “Overall, the manufacturing sector continued to improve in March, with expansion in supply and demand accelerating, and overseas demand picking up.

“Manufacturers increased purchases and raw material inventories amid continued improvement in business optimism.”

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Construction: Thorn In The Side For Steel Producers

That said, construction — a key industry for the demand dynamics of steel products — remains subdued, with China still facing a sharp slowdown in the property sector.

Meanwhile, the inventory of steel in Chinese ports was at its highest level in more than a year, according to data by Bloomberg, with around 143 tons in reserve.

This was reflected by the sharp losses seen for iron ore in recent months. Singapore futures were down 20% since the start of 2024, while CME futures were down 19.7% since the start of the year.

This was also knocked-on to the iron ore miners and steel refiners, and the exchange-traded funds that hold their stocks.

The VanEck Steel ETF SLX, was up 0.4% on Monday but is down 1.3% in 2024. Its top two holdings are Rio Tinto RIO and Vale VALE. Rio was up 0.7% on Monday, but remained 13.8% lower in 2024, while Vale fell 0.9% on Monday, and was down 24% on the year.

The broader SPDR S&P Metals & Mining ETF XME was up 0.9% on Monday and up 1.23 in 2024. Its top two holdings are Freeport McMoRan Inc FCX and Steel Dynamics Inc STLD.

Freeport specializes in copper and gold, which — particularly gold — have performed relatively well this year, was up 1.3% on Monday and is up 11.7% in 2024. Steel Dynamics was up 1.2% on Monday and is up 27 on the year.

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