Iron ore futures prices rebounded on Thursday amid mounting speculation that China, the top consumer, will announce more stimulus during its third plenum following disappointing June inflation data. The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) recouped early losses, ending daytime trade 0.8% higher at 828 yuan ($113.9) per metric ton. The benchmark August iron ore on the Singapore Exchange rose 2.5% to $107.9 a ton, as of 0711 GMT, hitting an intraday high of $109.25 a ton earlier in the session.
China’s consumer prices grew for a fifth month in June but missed expectations, while producer price deflation persisted, with domestic demand mired on a slow recovery track despite support measures for the world’s second-largest economy. A barrage of disappointing data in the second quarter has raised hopes that Beijing will unveil more economic stimulus in its third plenum over July 15-18. The Communist Party leadership meeting will outline efforts to promote advanced manufacturing, revise the tax system to curb debt risks, manage a vast property crisis, boost domestic consumption, and revitalise the private sector, according to policy advisers.
Despite a rebound driven by stimulus bets, prices of the key steelmaking ingredient are still under pressure from weak fundamentals. Analysts indicate that iron ore faces headwinds including widening losses among steelmakers, a further rise in steel inventories, and signs of hot metal output falling, as noted by analysts at Jinrui Futures in a recent report. Expectations of a fall in steel exports and a cut in steel output in the second half of the year have added further pressure on the market.
Other steelmaking ingredients on the DCE also gained ground, with coking coal and coke up 1.1% and 0.5%, respectively. Steel benchmarks on the Shanghai Futures Exchange showed mixed results, with rebar adding 0.6%, wire rod rising 0.8%, and hot-rolled coil advancing 0.2%, while stainless steel shed nearly 0.8%.
In Summary, while iron ore futures prices have seen a rebound due to speculation around Chinese stimulus measures, the market remains under pressure from weak fundamentals and various headwinds facing the steel industry.
Alien Metals Ltd (LON:UFO) is a global minerals exploration and development company that will shortly make the transition to iron ore producer. The company was formed from Arian Silver in late 2018, retaining some of the companies more valuable Mexican projects before embarking on an acquisition led strategy, headed up by an excellent geological team and targeted entirely on Western Australia.
