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Iron ore rebounds on China monetary stimulus, bets on more measures

Singapore and Dalian iron ore futures rebounded on Tuesday as market sentiment improved after the central bank of the world’s top steel producer lowered a short-term lending rate for the first time in 10 months.

The announcement came after the Singapore benchmark retreated 3% on Monday following a near-15% rise over eight straight sessions amid of hopes that China would roll out a series of stimulus policies to revive its beleaguered property market.

The People’s Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points to 1.90% from 2% on Tuesday as it injected 2 billion yuan through the short-term bond instrument.

Adding to the upbeat sentiment is also a Bloomberg News report that said, citing people familiar with the matter, China is considering a dozen stimulus measures to support areas including the property market, the largest steel consumer.

The move comes after a flurry of weaker-than-expected economic data in April and May.

The most-traded September iron ore on the Dalian Commodity Exchange (DCE) reversed the downtrend in the morning session and ended daytime trading 0.69% higher at 801.5 yuan ($112.10) a metric ton.

Meanwhile, other steelmaking ingredients likecoking coal and coke jumped 4.09% and 2.64%, respectively.

Rebar on the Shanghai Futures Exchange advanced 1.88%, hot-rolled coil added 1.77% and wire rod gained 3.16%.

“The recent rise in steel prices has helped to expand steel margins and encouraged blast-furnace-based steelmakers to restart operations,” analysts at Huatai Futures said in a morning note.

The fundamentals will only change after a steel output reduction policy is put into practice, they added.

China’s state planner is yet to make an official announcement in this regard.

Stainless steel lost 0.56%.

Source: Reuters

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