Iron Ore Prices Surge as China Cuts Rates and Unveils Stimulus Plans
China’s economic measures have sparked a rally in iron ore futures, with prices climbing for four sessions and heading towards a 10%+ weekly gain.
This surge comes on the heels of interest rate cuts and expectations of further fiscal and property sector stimuli in China.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) closed 4.38% higher on Friday. It reached 750 yuan ($106.94) per tonne, its highest level since September 2.
Meanwhile, the benchmark October iron ore contract on the Singapore Exchange rose 3.38% to $101.85 per tonne.
China’s central bank, the People’s Bank of China (PBoC), announced a reduction in the reserve requirement ratio for banks.
This marks the second such cut this year, aimed at bolstering economic growth. The move has improved market sentiment towards commodities, including iron ore.
The Chinese government has pledged to implement “necessary fiscal spending” to achieve its 2024 economic growth target of approximately 5%.
This commitment has heightened expectations for additional fiscal stimulus measures. China also plans to issue 2 trillion yuan ($285.2 billion) in special sovereign bonds as part of its new fiscal stimulus package.
Major Chinese cities like Shanghai and Shenzhen are considering lifting key remaining restrictions on home purchases.
This potential policy shift could stimulate demand for steel and iron ore. The property sector plays a crucial role in China’s economy and iron ore consumption.
Iron Ore Prices Surge as China Cuts Rates and Unveils Stimulus Plans
Earlier in the week, the PBoC launched its largest stimulus package since the pandemic. The central bank reduced average interest rates on existing mortgages by 50 basis points.
It also lowered the minimum down payment requirement to 15% for all types of housing. Two new tools were introduced to boost the capital market.
The first is a swap program with an initial size of 500 billion yuan. This program allows funds, insurers, and brokerages easier access to financing for stock purchases.
The second measure offers up to 300 billion yuan in ‘cheap’ loans from the central bank to commercial banks.
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Brazil — Live Market Board
+1.00%
177,418.78
+1.00%
65,048.39
-0.67%
11,315.26
-1.14%
3,033,848
+1.83%
2,425.08
-1.33%
59,928.30
-0.80%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 177,418.78 | +1.00% | +21.85% | 175,664.62 | 168,310 | 167,142 | — |
| USD/BRL | 5.16 | +0.01% | -5.13% | 5.16 | 5.18 | 5.14 | — |
| SELIC | 14.00% | — | — | — | — | — | |
| PETR4 | 41.64 | -0.05% | +35.19% | 41.66 | 41.97 | 41.15 | 41,499,400 |
| VALE3 | 72.97 | +0.83% | +30.75% | 72.37 | 73.54 | 72.66 | 17,658,000 |
| ITUB4 | 38.60 | -1.03% | +4.57% | 39.00 | 39.34 | 38.39 | 29,487,800 |
| BBDC4 | 16.85 | +0.36% | +3.50% | 16.79 | 16.90 | 16.67 | 19,416,900 |
| BBAS3 | 19.37 | +0.47% | +0.73% | 19.28 | 19.44 | 19.16 | 11,069,200 |
| B3SA3 | 14.26 | -0.21% | +12.73% | 14.29 | 14.47 | 14.11 | 33,037,800 |
| ABEV3 | 14.89 | -0.80% | +21.91% | 15.01 | 15.07 | 14.81 | 16,453,100 |
| WEGE3 | 47.59 | +0.49% | +29.99% | 47.36 | 48.08 | 47.36 | 3,364,600 |
| PRIO3 | 59.14 | -0.19% | +50.67% | 59.25 | 59.81 | 58.74 | 3,325,600 |
| SUZB3 | 41.33 | +2.35% | -23.55% | 40.38 | 41.48 | 40.35 | 3,914,900 |
| RENT3 | 34.68 | -0.09% | +0.84% | 34.71 | 34.96 | 34.35 | 7,979,100 |
| AZZA3 | 15.89 | -2.63% | -53.76% | 16.32 | 16.42 | 15.82 | 1,330,300 |
| CSNA3 | 4.30 | +0.47% | -42.65% | 4.28 | 4.41 | 4.26 | 10,076,100 |
| GGBR4 | 24.69 | +2.19% | +51.38% | 24.16 | 24.85 | 24.18 | 7,047,600 |
| ENEV3 | 24.21 | -1.38% | +70.49% | 24.55 | 24.64 | 23.99 | 9,297,000 |
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