Iron ore futures hit two-week highs on China economic boost

Iron ore futures rose to two-week highs and also recorded their highest weekly gains in six weeks after China, the world’s largest steel producer, announced more steps to support its economy which had been adversely impacted by Covid-19 lockdowns. A lower-than-expected August inflation reading in the world’s second largest economy also added to bullish sentiments with expectation of further central bank policy easing in the country.

The most-traded January iron ore on the Dalian Commodity Exchange closed the week 3.7 percent higher at 720.50 yuan or $103.92 a tonne, after touching its strongest since August 29 at 724.50 yuan earlier in the session. Dalian iron ore also climbed 7.4 percent for the week, ahead of the Mid-Autumn Festival holiday in China.

In the spot market, data provided by SteelHome consultancy showed that increased demand pushed the benchmark 62 percent-grade iron ore bound for China up more than 3 percent to $100.50 a tonne,

On the Singapore Exchange, the steel making ingredient’s benchmark October contract rose 3.2 percent to $103.25 a tonne.

Policymakers had during the week signalled a renewed sense of urgency to shore up the economy as the country’s cabinet announced more steps to spur investment, such as in new infrastructure projects.

ANZ commodity analysts noted that China’s intensified support for an ailing property market supported ferrous commodities, along with an aggressive push to boost infrastructure spending as Beijing looks to support growth in the face of COVID-19 lockdowns.

Sinosteel Futures analysts observed that the resumption of production in some steel mills has led to a continuous recovery in the average daily production of molten iron.

“The short-term demand remains at a moderately high level, but the room for increased demand is limited,” they noted.