KEY POINTS
- Iron ore futures rose 1.69 percent on China’s Dalian Commodity Exchange, driven by expectations of new stimulus and lower inventories.
- The Singapore Exchange saw a 2.46 percent rise in iron ore prices, trading at $92.95 per ton.
- China is expected to cut lending rates to stimulate demand and counter deflationary pressures.
Iron ore prices increased on Thursday, driven by optimism around potential new Chinese economic stimulus measures and a dip in stockpiles, despite ongoing concerns about weakened domestic demand in the world’s top consumer.
The most actively traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) rose by 1.69 percent, closing the daytime trade at $98.10 ( 693.0 yuan) per metric ton. Meanwhile, the benchmark October iron ore price on the Singapore Exchange saw a 2.46 percent increase, trading at $92.95 per ton.
China expected to introduce new stimulus
Market expectations are high that China will trim its primary policy and benchmark lending rates on Friday, following a Reuters poll. This comes after the U.S. Federal Reserve’s recent interest rate cut, which eased concerns over a sharp decline in the yuan.
According to a report by Mining.com, analysts suggest that Chinese policymakers will likely intensify efforts to help the economy reach its ambitious growth targets for 2024.
This includes focusing on stimulating demand to counter deflationary pressures, which have become more pronounced following weaker-than-expected economic data for August. The urgency for further economic measures is now increasing.
Falling inventories support Iron ore prices
In addition to the expected stimulus, iron ore inventories have also played a role in boosting prices. According to Chinese consultancy Mysteel, imported iron ore held by 64 Chinese steelmakers dropped by 0.4 percent from the previous week, reaching 10.9 million tons as of September 18. The consultancy attributed this decline to higher consumption by steel mills.
Mysteel noted that declining steel inventories could also help support steel product prices, particularly rebar and wire rods. Steelhome data further showed a 0.73 percent weekly decrease in iron ore stockpiles at Chinese ports as of September 13.
While Chinese steel exports remained at record highs in August, analysts at Westpac highlighted that this increase reflects a continued weakness in domestic demand. This trend has led to higher exports as steelmakers look for markets outside of China.
Other steelmaking inputs, including coking coal and coke, also saw gains on the DCE, rising by 2.3 percent and 2.71 percent, respectively. On the Shanghai Futures Exchange, steel benchmarks showed strength as well. Wire rod climbed 2.26 percent, rebar rose 1.14 percent, hot-rolled coil gained 1.03 percent, and stainless steel increased by 0.94 percent.
