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Dalian iron ore at one-week high on stimulus hope

Dalian iron ore futures extended gains on Monday to touch their highest in a week, as investor sentiment was bolstered by expectations of new stimulus policies following the release of weak industrial profit data on Saturday.

Profits at China’s industrial firms fell 20.6% in January-April from a year earlier, data from the National Bureau of Statistics (NBS) showed, as companies struggled with margin pressures and soft demand amid a faltering economic recovery.

Expectations of more economic stimulus policies arose partly because the NBS said China would focus on recovering and expanding demand in the next stage.

Meanwhile, market talk of May 26, that China would issue 5 trillion yuan of special bonds to support the economy, kept sentiment upbeat, though many analysts have argued against the possibility of such an issue.

The most-traded September iron ore on the Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trading 4.89% higher at 719 yuan ($104.02) a tonne, the highest since May 22.

“It’s mainly the expectation of macro-economic stimulus that drove the Dalian futures up today, but we believe the room for this round of rise will be relatively limited due to lingering downstream demand woes,” said Cheng Peng, a Beijing-based raw material analyst at Sinosteel Futures.

The benchmark June iron ore SZZFM3 on the Singapore Exchange reversed the downtrend in morning trade and was 1.66% higher at $102.25 a tonne, as of 0841 GMT, the highest since May 19.

“We expect prices to consolidate in the near term amid mixed factors; the remaining thin steel margins may limit the gains stemming from stimulus hopes,” said Connie Zhang, a ferrous analyst at consultancy Shanghai Metals Market.

Among other steelmaking ingredients, coking coal DJMcv1 rose 0.97% and coke DCJcv1 gained 0.28%.

Rebar on the Shanghai Futures Exchange SRBcv1 climbed 1.86% to 3,511 yuan a tonne, hot-rolled coil SHHCcv1 moved up 1.54%, wire rod SWRcv1 jumped 0.97% and stainless steel SHSScv1 ticked up 0.54%.

Source: Reuters

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