Mining
Thursday, January 4th, 2024 5:39 pm EDT
Key Points
- Iron Ore Futures Surge: Dalian iron ore futures recorded a fourth consecutive session of gains, driven by expectations of additional stimulus measures and the restocking activities of steelmakers in China, the world’s largest consumer of iron ore. The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) concluded daytime trading with a 0.3% increase, reaching 1,016 yuan ($142.09) per metric ton.
- Policy Support and ‘Three Major Projects’: China’s central bank injected 350 billion yuan in loans to policy banks through the pledged supplementary lending (PSL) facility in December, raising expectations of increased support for the country’s struggling housing sector. Analysts suggest that the PSL funds are likely to be directed toward the ‘three major projects,’ including the construction of affordable housing, urban village renovation, and the development of public infrastructure for dual use. Analysts at Citi anticipate that policymakers will enhance support for these projects, positively impacting steel and iron ore demand.
- Supply Disruption Concerns Ease: While iron ore prices gained due to stimulus hopes, concerns about supply disruptions from Australia eased. Fortescue reported multiple iron ore cars derailed from its tracks in Western Australia, but rail operations resumed on Wednesday as anticipated. Despite this, the benchmark February iron ore on the Singapore Exchange experienced a 1.13% decline, reaching $141.05 a ton, influenced by a stronger dollar as investors reassessed their expectations of the scale of rate cuts by the Federal Reserve in the wake of December meeting minutes. The interplay of stimulus dynamics, supply concerns, and global economic factors continues to shape the iron ore market, impacting futures and prices in major exchanges.
Dalian iron ore futures experienced a fourth consecutive session of gains on Thursday, driven by persistent expectations of additional stimulus measures and restocking activities by leading steelmakers in China, the largest consumer of the commodity. The most actively traded iron ore contract for May on China’s Dalian Commodity Exchange (DCE) concluded daytime trading with a 0.3% increase, reaching 1,016 yuan ($142.09) per metric ton. The boost in sentiment is attributed to the People’s Bank of China providing 350 billion yuan in loans to policy banks through its pledged supplementary lending (PSL) facility in December. Analysts anticipate that the PSL will likely be directed towards the ‘three major projects,’ comprising affordable housing construction, urban village redevelopment, and the development of public infrastructure for dual use. Citi analysts predict that this increased support for the ‘three major projects’ will positively impact demand for steel and iron ore. However, concerns about supply disruptions from Australia eased, and iron ore price gains decelerated. Fortescue reported the derailment of multiple iron ore cars on Saturday at its Western Australia operations, but rail operations resumed on Wednesday, as per expectations. In contrast, the benchmark February iron ore on the Singapore Exchange fell 1.13% to $141.05 per ton, influenced by a stronger dollar and revised expectations of the Federal Reserve’s rate cuts following the release of December meeting minutes. The dynamics of stimulus measures, supply disruptions, and global economic factors continue to shape the iron ore market, impacting futures and prices in key exchanges.
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