IRON ore futures in China surged 6 percent yesterday, extending sharp gains for a third straight session, as a sustained increase in steel prices burnished appetite for the raw material.

    Rising steel prices are lifting margins in China’s steel sector, hit previously by massive losses amid slow domestic demand that showed signs of recovery after the Lunar New Year. That is encouraging steel producers to ramp up output and once-shut mills to restart production, boosting demand for iron ore.

    Spot iron ore is back near US$60 a ton to its highest in a month, pushing its year-to-date gain to 36 percent.

    “Traders are expecting increased iron ore buying from the mills given the larger increase in steel prices,” said Wang Di, analyst at CRU consultancy in Beijing.

    The most-traded September iron ore on the Dalian Commodity Exchange climbed as much as 6 percent to hit its exchange-set ceiling of 424.50 yuan (US$66) a ton, before closing at 419 yuan, up 4.6 percent.

    It was the second day in a row that the contract surged 6 percent to hit its upside limit, following a gain of more than 3 percent Monday.

    On the Shanghai Futures Exchange, the most-active rebar rose 1.8 percent to end at 2,353 yuan a ton, off the day’s high of 2,435 yuan, its strongest since May 6, 2015.

    Many mills have increased their profit margin to 200-300 yuan per ton, from zero earlier this year, said a Shanghai-based trader. “I believe mills would try to increase their production in the short term as much as possible,” he said.

    Iron ore for immediate delivery to Tianjin port rose 4.7 percent to US$58.50 a ton Tuesday, the highest since March 9, according to The Steel Index.

    “If end-user steel consumption continues to surprise on the upside, we could see iron ore supported around the US$50-55/ton mark,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

    China’s iron ore imports rose 16.5 percent from a month ago to 85.77 million tons in March, data showed. (SD-Agencies)