SYDNEY, Feb 10 (Reuters) - Chinese iron ore futures jumped more than 2 percent on Friday, nearly matching multi-year peaks, lifted by news that January imports surged in a sign of a sharp uptick in demand from steel mills as the world’s second-biggest economy picked up steam.
The upbeat sentiment was stoked by a year-on-year 12 percent rise in China’s iron ore imports last month to 92 million tonnes, the second highest on record for any month, despite an early Lunar New Year holiday.
“Steel mills moved quickly in early January to import more ore before the New Year holiday and that pushed the number up for the month,” said Daniel Meng, an analyst at CLSA Materials & Transportation Research. “While the holiday meant less imports near the end of the month, net-net the impact was positive.”
Meng cautioned that the high import figure released by the General Administration of Customs also reflected a build-up of inventories at Chinese ports, which could slow future shipments into China. Larger steel mills in China prefer to maintain stockpiles at around six weeks consumption, while smaller mills keep inventories at three- to four-week levels, Meng said.
China’s iron ore stocks at ports stood at a record high last week SH-TOT-IRONINV.
“The customs data was positive news that the market was half-expecting, but it still had an effect,” a commodities trader in Perth, Australia said.
Investors in the iron ore market expect Chinese economic data in the coming weeks to show the economy got off to a good start in 2017, traders said. Investors were taking heart that steady growth was giving the central bank room to slowly tighten monetary policy and contain debt risk, they said.
Iron ore on the Dalian Commodity Exchange stood at 656 yuan ($95) a tonne after peaking earlier in the session at 661 yuan, just shy of January’s three-year high of 666 yuan.
Major Australian iron ore exporter Rio Tinto this week said it sees continued strong demand from China, but warned another 40 million tonnes of additional global supply could come on stream in 2017.
Three years ago, China was producing about 400 million tonnes of ore but has since cut that annual figure to around 275 million, according to analysts’ estimates.
The most active rebar on the Shanghai Futures Exchange stood at 3,255 yuan a tonne, recoiling after climbing as high as 3,273 yuan earlier in the day.
Imports of steel products fell 8.4 percent to 1.09 million tonnes while exports fell 4.9 percent to 7.42 million tonnes, the trade data showed.
$1 = 6.8770 Chinese yuan Reporting by James Regan; Editing by Kenneth Maxwell