Dalian and Singapore iron ore futures rose on Monday, on hopes that a monetary policy easing in China could curb the downside risks being faced by the world’s biggest steel producer and consumer, but gains were capped by steel output control fears.
The overall sentiment remained upbeat after state media on Friday quoted Premier Li Keqiang as saying China would cut banks’ reserve requirement ratios in a timely way.
However, a pollution alert in the country’s top steelmaking city of Tangshan, which means production curtailments in the industrial sector including steel and coke, and worries over Chinese property developers’ debt obligations tempered investor optimism.
The most-traded iron ore for May delivery on China’s Dalian Commodity Exchange ended daytime trading 1.6% higher at 615.50 yuan ($96.58) a tonne after rising 4.2% earlier in the session.
The steelmaking ingredient’s January contract on the Singapore Exchange was up 2.1% at $103.70 a tonne by 0732 GMT, off a session high $104.60.
“While we expect Chinese steel output and iron ore demand to contract in 2022, the prospect of easing monetary policy and China’s ‘three red lines’ should soften the slowdown,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.
Dubbed “the three red lines”, Chinese regulators have introduced financial requirements that developers must meet to get new bank loans.
“Market expectations are manifesting that domestic steel production will bolt higher post the Beijing Winter Olympics (in February), when restrictions are likely to be partially lifted,” Widnell said.
Spot iron ore in China traded at $104.50 a tonne on Friday, up from $102 a week earlier, based on SteelHome consultancy data.
Construction steel rebar on the Shanghai Futures Exchange rose 0.7%, while hot-rolled coil SHHCcv1 slipped 0.2%. Stainless steel shed 1.1%.
Dalian coking coal advanced 1.3% and coke climbed 3.1%.