Iron Ore's Potential for Fourth Consecutive Weekly Rise Fueled by Developments in China's Property Sector

Iron ore futures are heading towards their fourth consecutive weekly increase with a positive boost from China's new strategies aimed at stabilizing the housing market and fostering confidence. Even though concerns about higher inventories and potential limits on steel production in China have placed some constraints on the gains, the overall outlook remains upbeat.

The main contract for January iron ore on the Dalian Commodity Exchange in China concluded daytime trading on a high note, recording a 0.48% rise to reach 845.5 yuan ($116.40) per metric ton. This performance marks a solid 3.2% ascent for the week.

Over on the Singapore Exchange, the benchmark for September iron ore experienced a slight dip of 0.33%, settling at $115.95 per metric ton as of 0705 GMT. However, the week has seen an impressive 3.3% increase so far.

In an effort to rejuvenate the property market, China's central bank and financial regulator took action by introducing measures to facilitate borrowing for homebuyers. These measures include reducing mortgage rates for first-home buyers and lowering down payment requirements in select cities. These initiatives are the latest in a series of moves to breathe life back into the property market, which has been facing challenges.

Adding to the positive sentiment, the Caixin/S&P Global manufacturing purchasing managers' index displayed remarkable growth, reaching 51.0 in August from July's 49.2. This exceeded analysts' predictions of 49.3 and stands as the highest reading since February.

Although maintaining a cap on steel production for the year, as confirmed by the general manager of Baoshan Iron & Steel, China continues to push forward with its steel output management.

Recent data from consultancy Mysteel reveals an increase of 942,800 tons in portside iron ore inventories, bringing the total to 121.27 million tons as of September 1. Despite this rise, the market remains optimistic.

Meanwhile, coking coal and coke on the Dalian Commodity Exchange experienced notable surges of 6.41% and 3.94% respectively, reaching five-month highs. These gains come in response to concerns about potential supply reductions due to safety checks on coal mines.

A knowledgeable analyst based in North China, who prefers to remain anonymous due to media restrictions, shared insights on the situation, stating that the anticipation of reduced supply due to safety checks has prompted investors to adopt more favorable positions.

Shifting focus to steel benchmarks on the Shanghai Futures Exchange, analysts noted an upward trajectory driven by increased costs of raw materials and optimistic expectations for heightened demand in September. Rebar, hot-rolled coil, wire rod, and stainless steel all witnessed positive gains, with increases of 1.29%, 2.05%, 1.27%, and 0.63% respectively.

Source : Reuters (Reporting by Amy Lv and Dominique Patton)