Iron Ore Prices Bounce: Stimulus on the Horizon

Iron ore prices bounced yesterday, on further speculation in Chinese state media that the country would launch major infrastructure projects next year in a long mooted stimulus move.

From Business Insider:

The price for benchmark 62% fines jumped 1.4% to $67.65 a tonne, adding to the 1.2% gain seen on Wednesday. The benchmark now sits at the highest level since November 23.

58% fines rose more than the benchmark, surging 1.9% to $43.21 a tonne. In contrast, the price for 65% fines increased by only 0.1%, settling at $83.50 a tonne.

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Iron ore price looking like it will sit in proposed band

A month ago to the day, we proposed the following mid-term band for iron ore prices, taking into account a sharp drop due to winter production curbs:

Iron Ore Price Forecast

Source: tradingview.com

Now have a look at Business Insider’s 62% benchmark spot price chart via Metal Bulletin:

Iron Ore Price

Source:  Business Insider

Having flagged the winter production curb dip, the current bounce is beginning to materialise as expected.

The driving force behind this bounce is a boost in the price of steel futures.

SHFE Hot Rolled Coil and SHFE Rebar closed up .78% and 1.16% respectively.

Stimulus rumours firm up, iron ore could be impacted by economic data

This move in turn, came as Reuters reported yesterday that:

The Chinese government has tweaked its priorities to focus more on infrastructure, exports and fighting water pollution while slowing efforts to reduce capacity in coal and steel industries.

With a close eye on earlier reports out of China, the stimulus has been on the cards for the last few weeks.

The state media reports firm up the chances of the stimulus actually happening following editorials out of the South China Morning Post.

Going forward, release of Chinese economic data on industrial output and urban fixed asset investment could introduce volatility into iron ore prices in the short-term.

Expectations of 5.9% and 5.8% growth in the respective data sets, if off on the downside, may trigger a brief dip.

Regards,

Lachlann Tierney,
For Markets & Money

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Lachlann Tierney is a writer for Markets & Money. He has lived and studied in the US, the UK, and Australia. With an MSc from London School of Economics (LSE) he brings a strong grasp of geopolitics and world affairs to his analysis. Lachlann is always on the lookout for the news that will give you an edge in tomorrow’s markets.


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