Seaborne iron ore prices held firm on Monday after China returned to the market following the Lunar New Year holiday, with iron ore futures seeing gains on optimism about Chinese demand.

The Kallanish KORE 62% Fe index fell $0.02/t on Monday to $126.98/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index was $0.1/t higher at $141.4/dmt cfr, and the KORE 58% Fe index rose $0.02/t to $110.64/dmt cfr.

On the Dalian Commodity Exchange, May iron ore settled up CNY 21/t ($3.11/t) at CNY 877.5/t, while on the Singapore Exchange February 62% Fe futures settled $1.7/t higher at $128.76/t. The same contract for 65% and 58% Fe futures closed up $2.45/t to $143.9/t, and gained $1.03/t to $110.07/t respectively.

Scrap prices stood stable and billet prices jumped higher on Monday. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta was at CNY 3,042/t, and Tangshan billet rose CNY 30/t to CNY 3,900/t.

Trading in the iron ore spot market was buoyed by positive sentiment over demand. In the Chinese holiday week, global iron ore shipments fell further, while China's iron ore port arrivals have also declined.

With Covid-19 transmission slowing in China, steel market demand is expected to get a boost, supported by a pick-up in the property market. However, mills are still targeting cost reductions as their top goal this year, which could affect pricing for imported iron ore.

The first phase of the Sishanling Iron Mine in Benxi, Liaoning province is expected to start production early this year. The mine’s iron ore reserves are 2.48 billion tonnes, with an average Fe grade of 31.19%. The annual output of the first phase of the project will be 5.07 million tonnes of iron ore concentrate, reaching 67-69% Fe.

As a key project of China's "Cornerstone Plan", the commissioning of the iron ore mine will once again increase China’s domestic supply of iron ore.