Iron ore futures rose on Wednesday, with the Dalian benchmark contract hitting a two-week high, as a looming bond financing support for property developers in China added fuel to the steelmaking ingredient’s sentiment-driven rebound.
After a rout in October on worries about weakening steel demand in top producer China mainly due to COVID-19 curbs and a property sector downturn, iron ore has regained some strength this month.
Initially supported by speculations about China relaxing its strict COVID restrictions, iron ore’s gains widened after the self-regulatory body of China’s interbank market said on Tuesday it will expand bond financing for private firms, including developers, with support from the central bank.
Shares of Chinese real estate developers jumped following the news.
The most-traded January iron ore on China’s Dalian Commodity Exchange ended morning trade 2.2 percent higher at 683 yuan ($94.24) a ton, after touching its strongest since Oct. 24 at 691.50 yuan.
On the Singapore Exchange, benchmark December iron ore was up 0.4 percent at $88.25 a ton, as of 0349 GMT.
Other Dalian steelmaking inputs also extended gains, with coking coal and coke up 0.9 percent and 1.9 percent, respectively.
Shanghai Futures Exchange’s steel benchmarks also advanced, with rebar up 1.4 percent, wire rod up 0.8 percent, hot-rolled coil climbed 1.5 percent, and stainless steel edge 0.1 percent higher.
Such “short-term market sentiment recovery” presents an opportunity for traders and steel mills to replenish their thin iron ore inventories and jump into an “oversold market”, Huatai Futures analysts said in a note.
However, doubts remained whether iron ore’s gains could be sustained given concerns about surging new COVID-19 cases in China, which has reaffirmed its zero-COVID policy.
