By Emily Ou Yong
Iron ore futures climbed on Tuesday, as stronger Chinese manufacturing data and a drop in global shipments of the key steelmaking ingredient overrode concerns over mounting margin pressure at steel mills.
The most-traded September iron ore contract on China's Dalian Commodity Exchange (DCE) COMEX:TIO1! traded 0.61% higher at 747 yuan ($110.05) a metric ton.
The benchmark August iron ore (SZZFQ6) on the Singapore Exchange was 0.36% higher at $99.05 a ton as of 0715 GMT.
Both contracts have lost almost 5% in June.
China's factory activity returned to expansion this month, driven by demand for chips, computers and other AI-related products, as robust export orders and front-loading to the U.S. to get ahead of possible tariff hikes later this year offset weakness elsewhere in the economy.
The official manufacturing Purchasing Managers' Index rose to 50.3 in June from 50.0 in May, according to a survey by the National Bureau of Statistics (NBS), higher than the median forecast of 50.0 in a Reuters poll.
Stronger industrial activity typically lifts steel demand.
Global iron ore shipments decreased by 1.453 million tons over the past week, data from consultancy Mysteel showed on June 30.
Mill profitability fell to about 51%, down from 59% a year earlier, according to data from Mysteel.
(Mills') costs have climbed since a fatal coal-mining accident in Shanxi last month pushed up coke (another raw material) prices, Australian bank ANZ said in a research note.
Thinner margins typically prompt mills to scale back output to preserve profitability, which would further dampen demand for iron ore.
Other steelmaking ingredients on the DCE rose, with coking coal NYMEX:ACT1! up 0.99% and coke (DCJcv1) advancing 0.05%.
Steel benchmarks on the Shanghai Futures Exchange gained. Rebar SGX:RBF1! rose 0.03%, hot-rolled coil COMEX:EHR1! increased 0.15%, stainless steel COMEX:HRC1! climbed 1.68%, and wire rod (SWRcv1) advanced 0.27%.
($1 = 6.7881 yuan)