Iron ore extended a rebound with China’s huge inventories of the material continuing to draw down, in a tentative sign that a period of severe oversupply is starting to ease. 

Piles of the steelmaking material held at Chinese ports ballooned to well over 150 million tonnes in July this year, as the country’s steel crunch deepened. But volumes have fallen for the past four weeks, helping iron ore prices to steady after a slump to their lowest since 2022.

On Monday, futures in Singapore rose 3.2% to US$99.30 a tonne by 12:01 p.m. local time. They gained 4.5% last week.

Still, the broader outlook for China’s steel sector remains highly uncertain, amid a beleaguered property sector and a government-led shift to new growth sectors. Traders are monitoring whether steel production starts to pick up again after recent declines, as July and August are typically the weakest season for steel production.

Output at blast furnaces “has shown signs of bottoming out recently,” Huatai Futures Co, Ltd wrote in an emailed note, which also said that iron ore inventories remained relatively high.

Base metals also gained on Monday on the Shanghai Futures Exchange, with aluminum hitting its highest since July 16. The London Metal Exchange wasn’t trading due to a UK public holiday.

  - Bloomberg