Iron ore’s most-traded May contract on China’s Dalian Commodity Exchange ended daytime trading 1.3% higher at 742 yuan ($116.97) a tonne, after touching a one-week high of 747.50 a tonne earlier in the session.
China stepped up its monetary easing efforts to prop up a slowing economy this week by lowering a set of key policy rates and lending benchmarks, with markets expecting further moves.
“We view this week’s rate cuts as a pre-emptive move to drive a growth rebound in 2022,” said Commonwealth Bank of Australia commodity analyst Vivek Dhar, citing downside pressures from the reimposition of covid-19 curbs and the property sector’s downturn.
Mysteel estimates that utilization rates of blast furnaces will drop to about 55% in the key steel-making hub of Tangshan in China in February and March. It also expects rates to fall in the Shandong and Henan provinces.
Apart from China’s stimulus measures, Dhar said improved steel margins also supported iron ore prices.
“The fact that steel margins rose from November to December also suggests that steel demand has held up reasonably well – potentially indicating that steel demand from China’s infrastructure sector may be offsetting demand weakness from China’s property sector,” Dhar said.
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(With files from Bloomberg)
