Iron Ore Rises As China’s Construction Stimulus Pays Off
Iron ore prices rose after Chinese economic indicators suggested that a government stimulus is boosting the country's ailing construction industry.
(Bloomberg) -- Iron ore rose after Chinese economic indicators suggested that government stimulus is boosting the ailing construction industry, which should flow through to stronger demand for the steel-making material.
Higher steel output and falling rebar inventories are signaling Beijing’s bid to stimulate construction after an almost year-long property rout are having a positive impact. Daily steel output edged up 3.3% in the first 10 days of September compared with the end of August, while new investments are fueling building activity.
The market remains largely optimistic that disruptions to businesses due to strict Covid restrictions will be minimal amid the peak construction season, which lasts till end-October. It shrugged off news that a district in Tangshan that includes steel mills has been placed in a snap lockdown for at least three days.
With China’s recovery the main focus for authorities, the economic impact of lockdown restrictions may be lessening, according to Chen Wenguang, a research director at Lange Steel Information Research Center.
As blast furnaces continue to ramp up production, mills will move to restock iron ore inventories ahead of the week-long National Day holidays early next month, providing near-term support for prices, Haitong Futures said in a note.
Investor focus is also turning toward the National Party Congress meeting on Oct. 16, where new infrastructure funding or housing-loan policies may be announced. That would further aid sentiment for steel.
Iron ore added 1.9% to $98.85 a ton as of 11.13 a.m. in Singapore. Futures in Dalian were up 1.7%, while steel rebar and hot-rolled coil advanced in Shanghai.
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