China’s iron ore futures hit the upside limit on Monday as declining stockpiles at ports indicated steel mills’ improving appetite for the raw material, while expectations grew Beijing will roll out further support for its paralysed economy.
Iron ore on the Dalian Commodity Exchange ended up 5.8% at 653 yuan ($93.70) a tonne, after hitting the daily limit of 6% shortly before the close. Futures on the Singapore Exchange climbed as much as 5.6%.
Factory operations and construction activities in China are gradually resuming after a prolonged Lunar New Year holiday, work stoppages and travel restrictions aimed at containing a coronavirus outbreak.
“Business restarts are progressing, although still at a slow rate,” said Richard Lu, a senior analyst at commodity consultant CRU, in Beijing.
Steel demand may further pick up as expectations rise that China will roll out more stimulus measures after factory activity in the world’s second-largest economy contracted at the sharpest pace on record last month in the wake of the epidemic.
“Beijing has ramped up its fiscal and monetary policy support for SMEs and low-income individuals to fight the epidemic, and we expect more easing measures in coming months,” analysts at Nomura wrote in a note.
But doubts remain if the worst is over for China, which accounts for more than half of the world’s steel output and about half of overall demand.
“The number of restarted business looks high, but actual production level remains far from normality for steel end-use sectors,” analyst Lu said.
Nomura analysts also said China’s limited policy space and worsening balance of payments conditions, among other factors, would likely prevent Beijing from aggressively rolling out a big package of stimulus measures.
* Imported iron ore inventory at China’s ports fell to 126.95 million tonnes, as of Feb. 28, from 128.60 million tonnes on Feb. 21, SteelHome consultancy data showed.
* Benchmark 62% iron ore’s spot price settled at $84.50 a tonne on Friday, the lowest since Feb. 10.
* Construction steel rebar on the Shanghai Futures Exchange rose 2.0%, while hot-rolled coil jumped 2.6%.
* Stainless steel climbed 1.0%.
* Coking coal gained 2.7%, while coke added 2.6%.
Source: Reuters