Iron ore price reaches multi‑month highs on mega‑dam announcement

[Ben Graham]

Iron ore prices surged to their highest levels in nearly five months after China announced construction on a mega‑dam in Tibet.

Market optimism around renewed steel demand, along with ongoing stimulus expectations, bolstered prices. The September iron ore contract on the Dalian Commodity Exchange climbed 2.08 % to ¥809/ton ($112.74), peaking at ¥819, the highest since February 26.

The Singapore Exchange’s August contract rose 2.81 % to $103.60 a tonne, its highest since February 27.

China announced that construction has begun on the world’s largest hydropower dam, a project expected to require three to four times more steel than the country’s 22,000-megawatt Three Gorges Dam, currently the world’s largest capacity hydroelectric power station.

“Iron ore and rebar futures markets are reacting positively to the announcement of the mega-dam project,” Atilla Widnell, managing director at Navigate Commodities in Singapore, told Reuters.

There is little doubt that its construction will significantly benefit local steel markets and could attract construction-grade steel from across China, especially given that it is 3-4x bigger than the Three Gorges Dam, Atilla added.

Steel mill margins also contributed to the run‑up, with mills in China increasing blast furnace activity.

Other steelmaking inputs rallied too: coking coal futures jumped 7.88 %, coke up 5.05 % on Dalian.

(With files from Reuters and Bloomberg)