Iron ore futures prices surged on Monday, fueled by news of increased bond issuance by Chinese authorities to revitalize economic growth. Despite weaker-than-expected credit data, the market responded positively to the announcement.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange saw a remarkable 2.42% increase, closing at 888 yuan per metric ton. Similarly, the benchmark June iron ore on the Singapore Exchange rose by 1.25% to $117.25 per ton.
The finance ministry of China confirmed the imminent sale of long-term special treasury bonds to boost key sectors of the economy. This move is aimed at stimulating growth and addressing the challenges faced by various industries. Additionally, concerns over a temporary supply disruption following a train accident at Rio Tinto, the world’s largest iron ore supplier, added to the bullish sentiment in the market.
Rio Tinto reported that an autonomous train derailed at its Western Australian iron ore operations, with investigations underway and no casualties reported. This incident, coupled with the bond issuance news, played a significant role in boosting iron ore prices.
Although both benchmarks initially experienced losses due to weak data and mixed signals, the overall strength in hot metal output and growing demand for steelmaking ingredients contributed to the market’s resilience. Analysts at Huatai Futures highlighted that despite high portside ore inventories, the production resumption among mills supported the prices. On the other hand, coking coal and coke prices decreased, reflecting the fluctuating dynamics within the steel industry.
In response to the market conditions, the Chinese steel association urged steelmakers to reduce excess inventories to alleviate the oversupply issues prevalent in the sector. The ongoing developments suggest a positive outlook for the iron ore market driven by government interventions and industry initiatives.
