Dalian Iron Ore Futures Rebound on Fresh China Stimulus Hopes

October 10, 2024 07:17 PM AEDT | By Team Kalkine Media

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Highlights

Dalian iron ore futures rebound on renewed China stimulus hopes.

China's upcoming fiscal measures boost market sentiment.

Seasonal demand for steel strengthens alongside policy support.

Iron ore futures on the Dalian Commodity Exchange (DCE) experienced a notable rebound on Thursday, buoyed by optimism surrounding potential new fiscal stimulus measures from China. As the world’s top consumer of iron ore, China's economic policies and demand fluctuations significantly impact global iron ore markets. Recent developments suggest increased efforts to stimulate growth, alongside expectations of stronger seasonal demand for steel products, further supporting the rebound.

The most-traded January iron ore contract on the Dalian Commodity Exchange (DCE: 792.5 yuan per metric ton) rose 1.15% during the morning session to 792.5 yuan ($112.19), recovering from a sharp drop of over 4% seen in the previous trading session. In tandem with the gains in Dalian, the benchmark November iron ore contract on the Singapore Exchange climbed 2.16% to $107.15 per ton, reflecting broader optimism in the market.

A key driver of this renewed market confidence is the announcement that China’s finance ministry will unveil new fiscal stimulus measures at an eagerly awaited news conference on Saturday. Market participants speculate that these measures will include additional policies to stimulate economic growth, crucial for maintaining demand in China’s industrial sectors, particularly in steel production.

China’s steel industry plays a vital role in driving demand for iron ore, as steelmakers rely heavily on the commodity to produce their products. Recent signs point to a stabilizing steel market, supported by policy interventions aimed at bolstering the broader economy. According to analysts, these early indications suggest that the worst may be over for China’s steel market, which had previously been under pressure due to slower economic growth and weakening demand.

For companies like Rio Tinto Ltd (ASX:RIO), BHP Group Ltd (ASX:BHP), and Fortescue Metals Group Ltd (ASX:FMG), this rebound in iron ore prices is critical, as their operations are closely tied to China's iron ore demand. These mining giants could benefit from increased economic activity and stronger steel production in China.

The potential for more aggressive economic policies to be announced soon has bolstered market sentiment, helping iron ore prices recover from their recent lows. This recovery is also linked to seasonal factors, as steel demand typically picks up during the latter part of the year due to increased construction activities and infrastructure projects.

Looking ahead, market participants will closely monitor how these fiscal policies unfold and impact both China’s broader economy and its steel sector. Should these stimulus measures prove effective, they could provide continued support for iron ore prices, stabilizing the market further. For now, the combination of fiscal stimulus expectations and strengthening seasonal demand is providing a welcome boost to iron ore futures and mining stocks like Vale S.A. (NYSE:VALE) and Anglo American plc (LSE:AAL).

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