Iron ore prices rose on Thursday, the Dalian benchmark rose for the fourth consecutive session, bolstered by hopes of a rebound in steel demand and improvement in steel profit margins in top consumer China.
The top-traded iron ore for January delivery on China's Dalian Commodity Exchange ended day trading at 816 yuan ($125.89) per tonne, up 0.7 percent.
The most active October contract for steelmaking material on the Singapore Exchange rose 2.7 percent to $152 per ton as of 0710 GMT.
The pullback in iron ore prices from record highs in May has helped increase steel margins, which may have prompted Chinese mills to increase their output.
Referring to a report by the China Iron & Steel Association, analysts said that daily crude steel production during the period of 11-20 August averaged 2.14 million tons, up 4.6% compared to the average volume in the first 10 days of the month.
Spot iron ore fell from a record high of over $230 in May to less than $150 per tonne, partly as Chinese demand collapsed due to the country's ongoing steel production controls.
However, optimism regarding Chinese steel demand is providing some support for steel and iron ore prices.
"The acceleration in (issuance) of local government bonds is also fueling hopes for stronger steel demand in the coming months," said Daniel Hynes, senior commodity strategist at ANZ, referring to the 600 billion yuan worth of bonds sold by local authorities since last week.
He said the proceeds from these bond sales are often used to finance infrastructure projects.
Still, Hynes said that "heads are still strong for the steel and iron ore market."
Construction steel rebar on the Shanghai Futures Exchange fell 2.5% and hot rolled coil fell 3.4%. Stainless steel fell 0.9%.
Dalian coke fell 0.3% and coke fell 0.9%, both falling from record highs.
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