SGX iron ore logs best week in 3 months on China stimulus

Iron ore futures rose on Friday, with the Singapore benchmark on track for its biggest weekly gain since June, buoyed by China’s move to bolster economic stimulus efforts even as the country’s steel output shrank in August.

Benchmark October iron ore on the Singapore Exchange (SGX) climbed as much as 2.4% to $123.50 per metric ton, its strongest since mid-March. For the week, it has risen more than 8%, its biggest since the week ended June 9.

The steelmaking ingredient’s most-traded January contract on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 2.3% higher at 879 yuan ($120.91) per ton. It earlier hit a contract high of 881.50 yuan.

China’s central bank on Thursday said it would cut the amount of cash that banks must hold as reserves for the second time this year to boost liquidity – the latest in a series of stimulus measures, including steps to support a struggling property sector.

The reduction in banks’ reserve requirement ratio demonstrates China’s resolve to boost market confidence, Huatai Futures analysts said in a note.

“We should closely track the market opportunities brought about by macroeconomic policies and the intensity of raw material replenishment in the coming winter,” they said.

Adding to the upbeat mood, data showed China’s industrial output and retail sales grew faster than expected in August.

Analysts, however, said a likely official directive to limit this year’s steel output in top producer China to 2022 levels could curb iron ore prices in coming weeks.

China’s crude steel output in August fell by a sharper-than-expected 4.8% from the previous month, as some steel mills scaled back production amid shrinking margins.

Steel benchmarks in Shanghai rose, with rebar SRBcv1 up by 1.3%, hot-rolled coil SHHCcv1 by 1%, wire rod SWRcv1 by 0.4%, and stainless steel SHSScv1 by 0.7%.

Coking coal DJMcv1 and coke DCJcv1 on the Dalian exchange climbed 2.5% and 2.1%, respectively.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Varun H K and Subhranshu Sahu)