Iron ore prices have climbed to a one-month high, with the most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) closing nearly 1.8% higher at 864.5 yuan ($118.89) per metric ton. The benchmark August iron ore on the Singapore Exchange also rose 0.3% to $113.75 per ton, the highest since June 3.
The rally in iron ore prices is being driven by several factors:
Robust near-term demand: Analysts at Jinrui Futures noted that the relatively high level of hot metal output, despite signs of having touched a ceiling, has underpinned ore demand in the near term. They also expect a seasonal ramp-up in iron ore shipments to meet quarterly targets to come to an end.
Improved steel fundamentals: Improved fundamentals in the construction steel market, with demand picking up and destocking continuing, have also boosted overall sentiment, according to analysts at Huatai Futures.
Expectations of China stimulus: Persistent expectations of more stimulus measures from China, the world’s top consumer of iron ore, have provided much-needed support to the market. Analysts believe the upcoming Third Plenum meeting over July 15-18 will be crucial, as more stimulus is likely to be announced to bolster the sector.
Weaker U.S. dollar: A weaker U.S. dollar after softer-than-expected economic data in the U.S. has also lifted broad commodities, including iron ore and steel.
The combination of robust near-term demand, improved steel fundamentals, expectations of Chinese stimulus, and a weaker U.S. dollar have all contributed to the recent rally in iron ore prices, erasing most of the losses from the previous month.