Iron ore price extends gains on China stimulus hopes

Iron Ore Futures Prices Rise Amid Stimulus Hopes

Iron ore futures prices rose on Monday, buoyed by growing speculation that China, the top consumer, will unveil additional stimulus measures during its third plenum this week, following disappointing economic data. The September iron ore contract on China’s Dalian Commodity Exchange (DCE) ended the daytime session 1.03% higher at 834 yuan ($114.83) per metric ton. Similarly, the August iron ore benchmark on the Singapore Exchange increased by 0.69% to $108.75 per ton.

China’s economy showed signs of slowdown in the second quarter, with growth of 4.7% from April to June, falling short of the 5.1% forecast by analysts and down from the previous quarter’s 5.3%. This slowdown is attributed to a prolonged property downturn and job insecurity affecting domestic demand, heightening expectations for further stimulus from Beijing.

The latest economic data, including a smaller-than-expected increase in Chinese bank lending and record-low money gauges, have intensified the anticipation of additional policy support. The third plenum, which commenced on Monday, is expected to focus on promoting advanced manufacturing, addressing the property crisis, and boosting domestic consumption.

Supporting the prices of iron ore and other steelmaking ingredients is the robust demand in the near term. China produced an average of about 3.05 million tons of crude steel per day in June, the highest level since April 2023. Other steelmaking commodities on the DCE also saw gains, with coking coal and coke rising by 0.9% and 2.3%, respectively.

Steel benchmarks on the Shanghai Futures Exchange trended upward, with rebar increasing by 0.9%, hot-rolled coil gaining 0.8%, and stainless steel edging up by nearly 0.4%. Wire rod, however, saw a slight decline of 0.4%.

Citi analysts predict that the government will introduce another round of property-supporting measures following a meeting of the Politburo, expected in late July.