Iron ore prices rally on strong China exports 

Business a.m

Iron ore futures gained ground at the close of trading activities for the week, buoyed by multiple factors including robust export data from China, one of the largest consumers of iron ore. There was also speculation about more economic stimulus in China, and continued strong demand from the country’s steel industry.

The rise in futures prices came after China’s exports rose 3.9 per cent year-on-year in November, beating expectations and providing a boost to iron ore prices. The unexpected increase in exports was driven by strong demand from overseas markets, with China’s iron ore shipments to Southeast Asia, Europe, and South America all rising.

On the Dalian Commodity Exchange, the most-traded May iron ore futures contract gained 2.4 per cent to close at 958.5 yuan ($133.86) per metric tonne. It was the contract’s best week in five, up 3.8 per cent from the start of the week.

Meanwhile, on the Singapore Exchange, the benchmark January iron ore futures contract rose 0.9 per cent to $133.9 per metric tonne. It was also a positive week for the contract, up 1.2 per cent overall.

China’s exports grew in November for the first time since May, an indication that the country’s manufacturers are overcoming a slump in demand by offering discounts to customers. The increase was driven by a rise in orders from countries like Japan, South Korea, and Vietnam, suggesting that global demand for Chinese goods may be recovering.

Chinese iron ore imports also rose in November, up 3.4 per cent from the previous month, according to customs data. This increase suggests that steelmakers in China are increasing production in anticipation of stronger demand in the coming months.

In China’s stock markets, shares edged up on Friday as investors awaited the outcome of key policy meetings. There is speculation that the government may introduce new stimulus measures to boost the economy, which could support stock prices.

The outlook for iron ore, one of China’s key imports, was further buoyed by news that Brazilian miner Vale, one of the world’s largest producers of the commodity, maintained its production target for 2023. Vale is counting on stronger demand from China than previously expected.

Meanwhile, global iron ore supply is expected to increase after Rio Tinto announced plans to bring forward the start of production from its Simandou iron ore project.

In a report, analysts at ING said that the production guidance from major producers such as Vale would support the upward trend in raw material prices next year. This is due to expectations of increased demand from industries that use iron ore, such as steelmaking.

ING noted that the outlook for the iron ore market is improving, with prices having bottomed out in recent months and key indicators pointing to a recovery.

On the Shanghai Futures Exchange, all major steel benchmarks recorded gains. Rebar futures rose by 1.3 per cent, while hot-rolled coil and wire rod futures grew by 1.8 per cent and 0.4per cent, respectively. Stainless steel futures were also up, gaining 1 per cent.

These gains were in contrast to declines in some of the key inputs used in steel production, such as coking coal and coke, which fell by 1.6 per cent and 0.8 per cent, respectively.