(Bloomberg) -- Iron ore extended a rebound with China's massive inventories of the steelmaking staple continuing to drop, a tentative sign that a period of severe oversupply is starting to ease.
Stockpiles held at Chinese ports have now fallen for the last four weeks, according to data released late Friday, after ballooning to above 150 million tons in late July. The pullback has provided a glimmer of hope for bulls, although iron ore is still down almost 30% this year.
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The broader outlook for China's steel sector remains highly uncertain, however, due to 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.
Iron ore futures rose 4.2% to $100.20 a ton in Singapore as of 3:48 p.m. local time. That came after a 4.5% increase last week.
Output at blast furnaces “has shown signs of bottoming out recently,” but iron ore inventories remain relatively high, Huatai Futures Co. said in a note.
Base metals also rose on Monday on the Shanghai Futures Exchange, with aluminum hitting the highest since mid-July. The London Metal Exchange was shut due to a UK public holiday.
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