Iron Ore Rebounds Amid Expectations of New Stimulus in China
Foreks - Iron ore futures rebounded today, ending a two-session decline as hopes for further stimulus in China overshadowed the uncertain economic outlook of the world's largest consumer. The most traded January iron ore contract on the Dalian Commodity Exchange (DCE) finished the daytime session up 1.57% at 808.5 yuan ($111.12) per metric ton.
On the Singapore Exchange, the benchmark January iron ore rose 1.05% to $104.4 per ton as of 0728 GMT. Westpac analysts noted that iron ore prices were supported above $100 per ton on expectations of more stimulus announcements from the Central Economic Work Conference scheduled for December 11-12 in Beijing.
ANZ analysts stated, “China’s recent stimulus measures have revived steel demand, and consequently, iron ore demand, as property sales show some signs of improvement.” Stockpiles of raw materials used in steel production fell to their lowest level since August last week.
Meanwhile, China's new yuan loans in November are expected to nearly double compared to October, indicating a rise in loan demand following Beijing's recent stimulus measures. Nonetheless, consumer inflation dropped to the lowest level in five months in November, and ongoing deflation at factories suggests that the government's efforts to support weakening demand may have limited impact.
China also believes that more stimulus will be necessary to support fragile growth, considering the likelihood of new tariffs if Trump is re-elected as president. ANZ analysts mentioned that comments from Vale's CEO last week regarding responding to demand for lower-quality products impacted market sentiment for iron ore. “As margins remain under pressure, production will shift to lower-grade iron ore.”
Other steel production components on DCE weakened during the day, with coking coal and coke down 2.05% and 0.55%, respectively. Most steel benchmarks on the Shanghai Futures Exchange reversed early losses. Rebar rose 0.03%, wire rod added 0.23%, stainless steel gained 0.43%, but hot-rolled coil decreased by 0.11%.