Iron ore futures saw an uptick on Thursday following optimistic statements from Chinese officials, reigniting expectations for additional stimulus measures in the top consumer market. Despite the positive sentiment, the iron ore market faces constraints due to underlying weak fundamentals impacting the pricing dynamics of this crucial steelmaking component.
The most actively traded May iron ore contract on China’s Dalian Commodity Exchange surged by 1.54% to reach 887.5 yuan ($123.31) per metric ton, while the benchmark April iron ore on the Singapore Exchange recorded a 0.62% increase to $116 per ton.
China’s state planner expressed confidence in achieving the targeted 5% economic growth this year, with the governor of the People’s Bank of China (PBOC) hinting at potential reserve ratio requirement (RRR) cuts to bolster liquidity and facilitate government bond issuance.
Analysts at Goldman Sachs anticipate RRR reductions of 25 basis points in the second and fourth quarters to support liquidity amidst evolving economic conditions. However, concerns over capital outflows and currency depreciation may prompt the PBOC to maintain interest rates until the U.S. Federal Reserve implements its rate adjustments.
While positive market sentiments prevail, subdued demand from steelmakers continues to weigh on iron ore price gains, particularly amid sluggish downstream demand recovery. Analysts foresee daily hot metal output remaining below previous levels in March, indicating a challenging environment for price rebounds in the short term.
On the DCE, coking coal and coke experienced marginal declines, while steel benchmarks on the Shanghai Futures Exchange exhibited a mixed performance. Rebar, hot-rolled coil, and wire rod registered gains, while stainless steel prices dipped slightly, reflecting the nuanced dynamics within the steel sector amidst evolving market conditions.