Iron ore prices rose sharply for a second day on speculation that China’s massive stimulus package will help boost demand for the metal.
Iron ore briefly rose above $99 a tonne in Singapore before retreating, after closing up about 6% in the previous session. Beijing on Tuesday unveiled a raft of measures to support Asia’s largest economy, with a particular focus on moves to revive the property market.
The rise in iron ore has raised speculation that prices could continue to climb above $100. However, iron ore prices are still down more than a fifth since late May due to a slowing Chinese economy, a crisis in the country’s huge steel industry and strong supplies from producers in Brazil and Australia. Huatai Futures is one of the companies that has warned of the current volatile iron ore price.
“Driven by macroeconomic stimulus measures, iron ore prices are rebounding strongly in the short term, but the spot market remains cautious” about further price increases, the firm said in a research note. “If demand for steel products does not improve significantly, the market will not reach supply-demand balance and downside risks remain,” it added. Iron ore prices rose 3.6% to $98.10 a tonne after rising nearly 5%. In China, yuan-denominated steel futures in Dalian rose more than 3%, while steel futures in Shanghai also rose.
