Iron Ore Prices Surge as Soft Chinese Data Fuels Stimulus Anticipation

Iron ore futures prices saw an uptick on Thursday following the release of subdued data from China, the world’s leading consumer of the commodity, prompting expectations of increased stimulus measures in the second quarter to bolster the economy.

The most-active September iron ore contract on China’s Dalian Commodity Exchange (DCE) concluded daytime trading 1.29% higher at 826 yuan ($114.14) per metric ton. Similarly, the benchmark May iron ore on the Singapore Exchange rose by 1.12% to $107.9 per ton.

According to data from the National Bureau of Statistics, China’s consumer price index (CPI) showed 0.1% growth in March compared to a year earlier, but experienced a 1.0% decline month-on-month. Meanwhile, the producer price index (PPI) dropped by 2.8% year-on-year in March, widening from a 2.7% decrease in the previous month. These figures have sustained pressure on policymakers to introduce additional stimulus measures due to persistently weak demand.

A Reuters poll conducted on Thursday indicated that China’s economy likely expanded by 4.6% year-on-year in the first quarter, marking the slowest growth rate in a year, despite tentative signs of stabilization.

Analysts at Hongyuan Futures emphasized that the prices of iron ore were buoyed by ongoing expectations of heightened consumption amidst an increase in hot metal output and sustained cost competitiveness against steel scrap.

Analysts at Huatai Futures remarked in a note that overall macroeconomic expectations have somewhat improved following China’s recent announcement regarding policies aimed at managing crude steel output for the year. China unveiled plans last Wednesday to regulate crude steel production in 2024.

“Steel margins have improved, which may encourage steelmakers to resume production later, thus generating more needs for ore,” noted Huatai Futures, while also acknowledging challenges such as high portside ore stocks and elevated shipment levels.

Furthermore, there are expectations among analysts that certain steelmakers might accelerate production to bolster cash flow before being obliged to curb production later in the year.

The surge in post-holiday restocking activities among Chinese steelmakers further contributed to positive sentiment on Tuesday.

Data from consultancy Mysteel revealed a substantial increase in transaction volumes of iron ore at major ports, swelling to 1.63 million tons on Monday from 305,000 tons on Sunday, a working day in China.

In addition to iron ore, other steelmaking ingredients on the DCE also witnessed gains, with coking coal and coke prices rising by 2.92% and 3%, respectively.

Steel benchmarks on the Shanghai Futures Exchange demonstrated a positive trend, with rebar climbing by 0.75%, wire rod by 0.88%, stainless steel by 0.33%, and hot-rolled coil by 0.29%.

Cheng Peng, an analyst at Sinosteel Futures based in Beijing, noted that the “recent price gain in the market is more related to macroeconomic factors and more of a rebound driven by sentiment.”

Information for this briefing was found via and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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