Iron ore gains as latest China stimulus lifts sentiment

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Iron ore strengthened on Monday as investor sentiment was boosted by the latest China stimulus, shrugging off downward pressure from production cuts among some steel mills due to shrinking margins.

The most-traded January iron ore on China’s Dalian Commodity Exchange (DCE) ended daytime trading 2.86% higher at 862 yuan ($117.93) a metric ton, the highest since Sept. 25.

The benchmark November iron ore contractSZZFX3 on the Singapore Exchange was 2.46% higher at $117.1a ton, as of 0701 GMT, the highest since Oct. 3.

China’s central bank ramped up liquidity support to the banking system by conducting medium-term lending facility (MLF) operations worth 789 billion yuan.

With 500 billion yuan worth of MLF loans maturing, the PBOC is injecting fresh liquidity into the banking system.

“Prices remained firm as constrained supply for steel scrap resulted in robust consumption for iron ore,” analysts at Huatai Futures said in a note.

Low inventories also lifted sentiment in the iron ore market, as stocks slid for five consecutive weeks to 105.2 million tons as of Oct. 13, the lowest since June 2020, data from consultancy Steelhome showed.

However, the deepening crisis in China’s property sector, the world’s largest steel consumer, is likely to keep demand depressed despite further stimulus, ANZ bank analysts warned in a note.

Other steelmaking ingredients also exhibited gains, with coking coal DJMcv1 and coke DCJcv1 on the DCE jumping 3.57% and 4.54%, respectively, benefiting from robust demand and expectations of reduced supply.

Rising raw materials prices pushed steel benchmarks on the Shanghai Futures Exchange broadly higher, even as downstream demand remained lacklustre.

Rebar SRBcv1 advanced 1.05%, hot-rolled coil SHHCcv1 added 1.32%, wire rod SWRcv1 gained 0.15% and stainless steel SHSScv1 rose 1.05%.

Profitability among 247 blast furnace-based steel mills surveyed fell for a third week in a row to 24.24% in the week as of Oct. 13, data from consultancy Mysteel showed.

Source: Reuters

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