Dalian iron ore climbed to a seven-week high on Monday and the Singapore Exchange benchmark rebounded above $150 a tonne, as traders cheered China’s move to boost its short-term fund injection to counter any possible market liquidity tightness.
Other steelmaking ingredients trading on the Dalian Commodity Exchange and steel prices on the Shanghai Futures Exchange also rose, despite the risk-off sentiment in other assets amid China’s heightened COVID-19 curbs.
The most-traded Dalian iron ore, for September delivery DCIOcv1, ended daytime trading 4.4% higher at 870 yuan ($136.52) a tonne, after earlier touching 882.50 yuan, its highest since Aug. 30.
Iron ore’s most-active May contract on the Singapore Exchange SZZFK2 was up 0.4% at $154.80 a tonne, as of 0721 GMT.
“The market initially sold off in the first 15 minutes but has since reacted very positively to the People’s Bank of China injecting 150 billion renminbi in seven-day reverse repos this morning – shoring up short-term liquidity before the end of the current quarter,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.
“More aggressive liquidity injections provide the market some degree of comfort and confidence that local banks will not face a funding squeeze,” he said.
China will also soon roll out measures to make it easier for private companies to issue bonds, China’s securities regulator said late on Sunday.
Heightened coronavirus restrictions in top steel producer China, with the financial hub of Shanghai launching a two-stage lockdown, could further dampen growth outlook for the world’s second-biggest economy.
A pullback in Shanghai nickel prices SNIcv1 after the stainless steel raw material posted on Friday a record weekly gain, also prompted profit-taking in stainless steel futures. The Shanghai benchmark contract SHSScv1 tumbled 6.4%.
Construction steel rebar on the Shanghai exchange SRBcv1 gained 1.6%, while hot-rolled coil SHHCcv1 advanced 1.3%.
Dalian coking coal DJMcv1 climbed 1.2% and Dalian coke DCJcv1 added 0.9%.