Iron ore extends climb on China stimulus bets

in Commodity News,Dry Bulk Market10/06/2023

Iron ore futures advanced on Friday, on track for a second consecutive weekly gain, driven by optimism about demand prospects as signs emerged that top steel producer China is moving to support its faltering economy.

The most-traded September iron ore on China's Dalian Commodity Exchange ended daytime trading at 812 yuan ($114.03) per metric ton, up 3.4%, just below the session-high of 812.50 yuan, which was its strongest since April 3. It has risen more than 7% this week.

On the Singapore Exchange, the steelmaking ingredient's benchmark July contract was up 2% at $112.45 per metric ton, as of 0800 GMT, taking its weekly gain to more than 8%. It earlier climbed to $112.65, its highest since April 20.

"Iron ore continues to defy gravity. Traders are betting on a wider, more substantial stimulus package to come," analysts at brokerage SP Angel said in a note.

China's state-backed banks on Thursday lowered the rates on yuan deposits in actions that could ease pressure on profit margins and reduce lending costs, providing some relief for the financial sector and wider economy.

The measure opens the door for further monetary stimulus, including a cut in the reserve requirement ratio to support local government bond issuance, analysts say, as latest data showed China's economic rebound losing momentum in the second quarter.

Rebar contract on the Shanghai Futures Exchange SRBcv1 rose 1.6%, widening its weekly gain to more than 3%, even as demand is expected to weaken during the summertime lull in China's construction activity beginning this month.

Hot-rolled coil SHHCcv1 gained 2%, wire rod SWRcv1 added 3.2% while stainless steel SHSScv1 edged up 0.2%.

Steel inventories held by Chinese traders surveyed by consultancy Mysteel thinned for the fifth straight week during June 2-8, falling by another 2.5% week-on-week, with respondents citing increased trading activities for the dip.

Coking coal DJMcv1 and coke DCJcv1 on the Dalian exchange rose 1.3% and 2.3%, respectively.Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Sherry Jacob-Phillips)