Home » Iron Ore Prices Surge on Positive China Data and Increased Spot Liquidity

Iron Ore Prices Surge on Positive China Data and Increased Spot Liquidity

Steel Demand Expected to Rise in Late March, Analysts Say

by Victor Adetimilehin

Iron ore prices climbed for a second consecutive day on Tuesday, reaching their highest point in nearly a week. This surge is fueled by growing stockpiling interest in China, the world’s top consumer of raw materials, and signs of a stabilizing steel market.

China’s Upbeat Economic Data Boosts Sentiment

The positive momentum follows the release of encouraging economic data from China. Fixed asset investment in the country rose 4.2% year-on-year during the January-February period, exceeding analyst expectations of a 3.2% increase. This data suggests potential growth in steel demand, a key driver of iron ore prices.

Analysts at ANZ Bank believe this rise in investment “should help support steel demand” in the coming months.

Beyond the positive economic data, signs of increased liquidity in the spot iron ore market are also contributing to the price rise. Stabilizing futures prices on Monday encouraged steel mills to re-enter the market and purchase portside cargoes. This increased buying activity, in turn, bolstered market sentiment.

Transaction volumes at major Chinese ports surged by 66% from the previous day, reaching 1.06 million tons, according to data from consultancy Mysteel. This significant rise in trading activity indicates a more active spot market.

Analysts at Galaxy Futures believe that hot metal output, a key indicator of steel production, may have reached its bottom this week. They also predict an “obvious increase” in steel demand from the infrastructure sector in late March or early April. This anticipated rise in demand could further support iron ore prices.

“We expect hot metal output to touch the bottom this week,” analysts at Galaxy Futures said in a note.

“Steel demand from the infrastructure sector will likely see an obvious increase in either late March or early April, so we do not think we should be so bearish about the construction steel market,” they added.

Broader Steel Market Gains

The positive sentiment surrounding iron ore is also spilling over to other steelmaking raw materials. Coking coal and coke, both essential ingredients in steel production, saw price increases of 3.59% and 2.49% respectively on the Dalian Commodity Exchange (DCE).

Steel benchmarks on the Shanghai Futures Exchange also experienced gains. Rebar, a type of steel reinforcing bar, rose 2.85%, while hot-rolled coil and wire rod climbed 2.99% and 2.14% respectively. Stainless steel prices remained relatively unchanged.

The recent surge in iron ore prices reflects a cautiously optimistic outlook for the steel market in China. Positive economic data, coupled with increased spot market activity, suggests potential growth in steel demand. While some analysts remain cautious, the overall sentiment leans towards a potential increase in steel production and iron ore consumption in the coming months.

Source: Mining.com

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