Iron ore futures experienced a significant rise on Monday, reaching a two-week high, influenced by a promising Chinese economic outlook. This surge followed robust services data and continued expectations of economic stimulus from China, the leading consumer of iron ore.
The September iron ore contract on the Dalian Commodity Exchange (DCE) in China saw a morning trade increase of 3.41%, settling at 787.5 yuan ($110.22) per metric ton. It peaked at 788.5 yuan during intraday trading, marking its highest level since July 22. Concurrently, the benchmark September iron ore on the Singapore Exchange rose by 1.72% to $105.6 per ton, its strongest performance since July 18, as recorded at 0330 GMT.
A private-sector survey revealed accelerated growth in China’s services sector for July, marking its 19th consecutive month of expansion. Despite a slight easing in both the services and manufacturing sectors from June, they remained in expansionary territory, with employment growth hitting its fastest pace in 11 months.
China’s State Council released a communique on Saturday aiming to enhance the “high-quality development of service consumption.” The document outlined measures to invigorate consumption by improving product and service quality and providing financial support through tax deductions and credit facilities.
This year, domestic demand has been a significant drag on China’s economy. However, the introduction of supportive policies to boost consumption is a positive sign, though the market may still anticipate broader demand-side measures, such as consumption vouchers, according to ING analysts.
The steel market is also expected to rebound this week, buoyed by increased stimulus efforts that enhanced market confidence last week, as noted by Hexun Futures. Steel benchmarks on the Shanghai Futures Exchange showed strength, with wire rod climbing nearly 1.7%, hot-rolled coil advancing about 1.4%, rebar gaining around 1.2%, and stainless steel adding 0.64%.
Additionally, other steelmaking ingredients on the DCE showed gains, with coking coal and coke rising by 0.39% and 0.95%, respectively.
The recent rise in iron ore prices and the optimistic outlook for the steel market are clear indicators of the positive impact of China’s economic measures and stimulus expectations. While the market remains hopeful for further demand-side policies, the current trajectory points towards a potential rebound in both the iron ore and steel sectors.
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.
