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Iron ore reaches multi-week high in hopes of improved China demand

Iron ore futures prices rose for the third consecutive session on Thursday, reaching multi-week highs. This was aided by expectations of improved China demand.

However, the rising steel stocks fueled concerns about the pace of steel resumption and capped gains.

The January contract for iron ore on China's Dalian Commodity Exchange closed the daytime trading 1.67% higher, at 791.5 Yuan ($110.65), reaching its highest level since August 14,

By 0800 GMT, the benchmark October iron ore traded on Singapore Exchange had risen 1.66% to $104.95 per ton. It reached its highest level since the 24th of July at $105.35.

Yingguang Wang said that some steelmakers were planning to resume production and increase raw material procurement on Thursday, according to a note written by an analyst from Lange Steel the day before.

Steel mills at the top Chinese steelmaking center Tangshan had to reduce production temporarily to improve air quality in preparation for a military display in Beijing to mark the end of World War Two on September 3. This weakened ore demand.

A Singaporean trader who requested anonymity because he was not authorized to speak with the media said, "A lot money flowed from stock markets today in order to buy iron ore."

He said, "I am not very optimistic so I plan to build some short positions."

Chinese stocks fell as investors took profits on surging tech stocks after reports that regulatory restrictions on speculation could be in place.

Steel stocks are likely to rise and the demand for steel may be low. This could prevent mills from quickly restarting production.

Analysts at Yongan Futures stated that portside stocks would be expected to keep price increases in check.

Coking coal, coke and other steelmaking materials fell by 1.97% and 1.37 percent, respectively.

The benchmarks for steel on the Shanghai Futures Exchange are mixed. The rebar benchmark was unchanged, but hot-rolled coils rose 0.24%. Wire rod rose 0.34%. Stainless steel fell 0.58%. ($1 = 7.1529 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)

(source: Reuters)