Iron ore futures rose on Thursday, with the Dalian benchmark contract touching a two-week high, underpinned by increased construction activity in top steel producer China and sustained policy support for the sector.

Iron ore also remained supported by restocking demand ahead of China’s Golden Week holiday beginning Oct. 1, analysts said.

Rebar prices held firm near a four-week high.

The most-traded January iron ore on China’s Dalian Commodity Exchange ended daytime trade 0.8% higher at 722.50 yuan ($100.38) a tonne, after hitting a Sept. 15 high of 731 yuan earlier.

On the Singapore Exchange, the steelmaking ingredient’s most-active October contract was up 1.1% at $95.90 a tonne, as of 0700 GMT.

Steel inventories in China have fallen, reflecting improving domestic demand, though it also indicated reduced output, ANZ commodity strategists said in a note.

China has distributed an additional 300 billion yuan ($42 billion) allocated for infrastructure projects through three state policy banks as of Wednesday, the official Securities Times reported.

The increased funding is among measures rolled out to shore up a domestic economy that has been hit hard by COVID-19 restrictions and property-sector troubles.

But caution was expected to dominate the market ahead of the holidays and next month’s congress of China’s ruling communist party.

“Any signs that it will maintain strict virus controls could see the outlook for construction activity remain subdued for the foreseeable future,” ANZ said.

Rebar on the Shanghai Futures Exchange rose 0.1%, hot-rolled coil slipped 0.2%, and stainless steel SHSScv1 climbed 0.4%.

Dalian coking coal DJMcv1 shed 0.5%, while coke gained 0.4%.

Worries about a weakening yuan also eased, with the state-owned Securities Times saying in a front-page commentary on Thursday that a rapid depreciation was unlikely to continue.

Source: Reuters