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SINGAPORE: Dalian iron ore futures rose one percent on Monday, extending a recent rally that has given the plunging commodity some year-end respite, but physical activity remained tepid, offering little hope for a price recovery next year.
Global oversupply and shrinking Chinese steel demand have pummeled iron ore prices, with the spot rate of the steel-making commodity down 44 percent this year.
Prices, however, have seen a modest uptick in the last two weeks as traders closed out a contract expiring in December, a Shanghai-based trader said, although he wasn't optimistic about the rally continuing.
The most-active May iron ore contract on the Dalian Commodity Exchange rose 1.5 percent to close up at 309 yuan ($47.64) a tonne, after closing higher for a second straight week on Friday.
"Activity on the physical side is very quiet. Most of the buyers in the market are not ready to take new cargoes at the end of the year," said the trader.
Obtaining letters of credit during the holiday-shortened week was also hampering deals, he said. The most-traded May rebar contract on the Shanghai Futures Exchange closed up 0.7 percent at 1,741 yuan ($268.44) a tonne.