Iron ore prices experienced a significant surge, driven by easing liquidity concerns in China and a positive demand outlook. The most-traded September iron ore contract on China’s Dalian Commodity Exchange jumped by 4.4% to 915 yuan ($126.58) per metric ton. On the Singapore Exchange, the benchmark June iron ore rose by 3.9% to $122.35 a ton.
This price rally is primarily attributed to increased optimism surrounding China’s economic prospects. Recent measures by the People’s Bank of China to inject liquidity into the market have alleviated concerns about financial constraints. The improved liquidity situation is expected to stimulate infrastructure projects and manufacturing activity, boosting demand for steel, and consequently, iron ore.
Analysts also point to a generally positive outlook for steel demand, both domestically and internationally. Infrastructure spending remains a key driver of economic growth in China, and construction activity is picking up in other parts of the world as well.
However, some analysts caution that the price surge may be partially speculative. Inventory levels of iron ore at Chinese ports remain relatively high, and there’s a risk that demand may not keep pace with the current price levels. Market participants are closely watching economic data releases from China for confirmation of the strengthening demand. Any signs of a slowdown could trigger a correction in iron ore prices. Despite the cautions, the near-term outlook for iron ore remains positive, supported by the combination of eased liquidity in China and expectations of robust steel demand. This makes it a key commodity to watch in the coming weeks.
