Iron ore futures prices surged on Thursday following subdued data from China, the world’s top consumer of the commodity, sparking expectations of increased stimulus measures to revive the economy in the second quarter.
The most-active September iron ore contract on China’s Dalian Commodity Exchange rose by 1.29% to 826 yuan ($114.14) per metric ton, while the benchmark May iron ore on the Singapore Exchange climbed 1.12% to $107.9 per ton.
China’s consumer price index (CPI) showed a 0.1% growth in March year-on-year but experienced a 1.0% month-on-month decline. The producer price index (PPI) dropped by 2.8% year-on-year in March, signaling weak demand and putting pressure on policymakers to introduce more stimulus measures.
A Reuters poll suggested China’s economy likely expanded by 4.6% year-on-year in the first quarter, marking the slowest growth in a year.
Analysts predicted a 10% weekly gain in iron ore prices on speculation of a recovering Chinese economy. Futures in Singapore held steady near US$108 a tonne on Friday.
Analysts at Hongyuan Futures attributed the rise in iron ore prices to expectations of increased consumption and competitive production costs against steel scrap. Meanwhile, analysts at Huatai Futures highlighted improved macroeconomic expectations following China’s policy announcement to regulate crude steel output in 2024.
The surge in post-holiday restocking activities among steelmakers in China also contributed to positive sentiment. Data from consultancy Mysteel showed a significant increase in iron ore transaction volumes at major ports.
Overall, the market appears to be driven by macroeconomic factors and sentiment, according to analyst Cheng Peng from Sinosteel Futures in Beijing.
