- Chinese spot and futures prices rose on Friday.
- Speculation over stronger demand, helped by renewed hopes over a trade breakthrough between the US and China and additional monetary stimulus from the PBoC, was one factor behind the move.
- Chinese commodity futures gave back some earlier gains on Friday evening.
Iron ore spot prices climbed on Friday, helped by speculation over improved demand in the months ahead.
According to Metal Bulletin, the price for benchmark 62% fines rose 0.7% to $73.10 a tonne, leaving it at the highest level since November 21 last year.
The price for 65% Brazilian fines lifted by a smaller 0.2%, settling at $87.40 a tonne. 58% fines climbed by a larger 1.1% to $46.13 a tonne, the highest level since late October.
Analysts said the across-the-board gains were helped by optimism towards the outlook for Chinese steel mill demand.
“Our data analytics model shows low iron ore inventory at steel mills warehouses. So, they are looking to replenish,” Darren Toh, a data scientist with Tivlon Technologies, told Reuters.
“We are seeing more relaxation in using iron ore in Q1 2019.”
Along with hopes for stronger demand, sentiment was also helped by news Chinese and US officials will resume trade talks in Beijing today.
An announcement from the People’s Bank of China (PBoC) that it will cut the reserve requirement ratio (RRR) for Chinese banks by 100 basis points also contributed to late strength in Chinese steel and bulk commodity futures on Friday.
“It sends a clear signal for further monetary easing to cushion growth shocks and stabilise market sentiment,” said BAML’s Asian economics team.
“We believe that there is still ample room for RRR cuts in 2019, given the current RRR level is still relatively high. The PBoC will likely take multiple measures to help the transition from liquidity loosening among banks to better credit support to the real economy.
“Going forward, faster credit expansion and property policy easing will be crucial to economic cycle rebooting in the coming months.”
The announcement saw futures markets rally hard during the day session, a move that was largely sustained in overnight trade on Friday.
SHFE Hot Rolled Coil ¥3,370 , 0.60%
SHFE Rebar ¥3,475 , 0.46%
DCE Iron Ore ¥507.50 , 0.40%
DCE Coking Coal ¥1,183.00 , 0.47%
DCE Coke ¥1,942.50 , 0.39%
Trade in Chinese commodity futures will resume at midday AEDT.
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