Iron ore futures in China jumped more than 2 percent on Monday after stockpiles of the raw material at the country’s ports fell for the seventh week in a row to the lowest since December 2013 as Chinese steel mills replenished holdings.
Limited availability of medium- to high-grade spot iron ore cargoes had also pushed buyers to the ports as shipments from top supplier Australia slowed due to rainy weather, traders said.
Inventory of imported iron ore at 44 Chinese ports dropped 1.3 million tonnes to 85.4 million tonnes as of Friday, according to consultancy SteelHome, which tracks the data. Stocks have fallen 16 percent this year.
Iron ore for September delivery on the Dalian Commodity Exchange was up 2.4 percent at 435 yuan ($70) a tone by 0242 GMT after hitting a session high of 439 yuan.
“The market has been hit by oversupply worries. If there’s any sign of improvement in demand, then that is a catalyst for prices,” said Helen Lau, an analyst at Argonaut Securities in Hong Kong, citing the drop in port stocks.
The fall in stocks has also helped fuel a rally in spot iron ore, with the price rising in May for the second month.
However, iron ore for immediate delivery to China’s Tianjin port slipped 1.4 percent on Friday to $61.40 a tonne after touching a three-month peak of $62.60 earlier in the week, according to data compiled by The Steel Index (TSI). The benchmark gained 9.3 percent in May after rising 10.2 percent in April.
TSI said it would not release a price for Monday due to a Singapore public holiday.
“Reports suggest supply disruptions from Australia’s Pilbara region from heavy rains last week could extend near-term tightness in the market,” Australia and New Zealand Banking Group said in a note.
“However, supply disruptions will likely be short-lived and prices are likely to remain under pressure from soft Chinese steel demand.”