Chinese iron ore and steel futures rose on Thursday after the country’s central bank said it would take monetary policy steps to help businesses hit by the COVID-19 outbreak and support a recovery in consumption.
Returning from a five-day Labour Day break, traders were also upbeat about replenishment demand remaining strong for the steelmaking ingredient in the world’ top steel producer.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 1.9% higher at 871.50 yuan ($131.74) a tonne. It touched 881.50 yuan earlier in the session, the highest since April 25.
On the Singapore Exchange, the most-active June contract SZZFM2 rose 1.6% to $145.15 a tonne by 0710 GMT.
The People’s Bank of China on Wednesday vowed to “waste no time planning incremental policy tools to support steady economic growth, stabilise employment and prices … to provide a fair monetary and financial environment”.
The remarks, lacking in details, came after a top decision-making body of the ruling Communist Party last week pledged to support the economy.
Such promises may work well to shore up confidence, but analysts said any market gains may not be sustainable in the absence of clear plans.
“While it may be left to relevant government bodies to thrash out the finer details, markets will grow impatient waiting for robust policies which will have a material impact on iron ore and steel demand,” said Atilla Widnell, managing director at Navigate Commodities.
Rolling out additional stimulus measures has become more urgent amid China’s tough COVID-19 restrictions, analysts have said.
Beijing shut scores of metro stations and bus routes and extended curbs on many public venues on Wednesday, while Shanghai remained under strict lockdown.
Construction steel rebar on the Shanghai Futures Exchange SRBcv1 rose 1.2%, while hot-rolled coil SHHCcv1 gained 1.3% and stainless steel SHSScv1 climbed 1.5%.
Dalian coking coal DJMcv1 slipped 0.2%, while coke DCJcv1 advanced 0.6%.