China’s iron ore futures climbed to their highest in more than six weeks on Monday after data showed stockpiles of the steelmaking raw material at the country’s ports declined for two consecutive weeks. Beijing’s promise to step up policy support to counter the economic fallout from a coronavirus outbreak also lent support not just to iron ore but to steel futures as well.
The Dalian Commodity Exchange’s most-traded iron ore contract, expiring in May, rose as much as 2.0% to 683.50 yuan ($97.29) a tonne, the highest since January 8. If sustained, the benchmark contract will mark its tenth consecutive session of gains. The last nine saw it rising 15.5% in its longest rally since June 2016 amid declining supplies from Australia and Brazil, which have pushed spot prices to four-week highs.
Stockpiles at China’s ports fell further to 128.6 million tonnes as of February 21, from 130.65 million tonnes a week earlier, data compiled by SteelHome consultancy showed. Amid falling iron ore inventory at ports, some steel mills in China were seen last week rebuilding their stocks as authorities began easing transport curbs that have been imposed to help contain the epidemic.
China, which has already rolled out a raft of stimulus measures to cushion the blow to the economy from the outbreak, will step up policy adjustments, President Xi Jinping was quoted as saying on Sunday. Xi said the outbreak “will inevitably have a relatively big impact on the economy and society.”
“The official statement over the weekend struck a more decisive and explicit tone in adopting a pro-growth full-range stimulus measure to protect and boost the economy,” said Helen Lau, analyst at Argonaut Securities in Hong Kong.
“Thus, we expect stronger and more targeted stimulus to be announced soon,” she wrote in a note. Benchmark 62% iron ore’s spot price hit its highest since January 22, settling at $92.50 a tonne over the weekend, SteelHome data showed.
Construction steel rebar on the Shanghai Futures Exchange was up 0.6% by 0303 GMT, while hot-rolled coil, used in cars and home appliances, rose 0.9%. China’s biggest steel producer, China Baowu Steel Group, expects output to fall 5% in the first quarter of 2020 due to coronavirus disruptions.
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