Iron ore continued its tumultuous recovery from 18-month lows as moves to bolster the struggling real estate sector in China bolstered the demand outlook.
Futures in Singapore rose more than 50% in just six weeks as demand expectations rose. Authorities in China are encouraging banks to finance the purchase of projects by distressed contractors, forcing financially sound real estate firms to make such purchases. Additionally, local banks lowered their borrowing costs for the first time in 20 months, and the People's Bank of China earlier this month reduced the amount of cash banks had to hold in reserves to release funds.
Prices are rising even higher as production at Chinese steel mills surged after tight volumes restrictions earlier this year.
“The improvement in property and infrastructure outlook has added fuel to factories' expectations to resume production,” Holly Futures wrote in a note, adding that recently started winter stockpiles have also supported demand for raw materials, but environmental controls remain.
Iron ore in Singapore rose 4% to $129.45/t, its highest level since mid-October, before trading at $128.20 at 3:35 p.m. local time. Dalian futures rose 4.2%, while steel rebar and hot rolled coil eased in Shanghai.
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