Benchmark Dalian and Singapore iron ore futures hit four-week highs on Monday as China’s forecast-beating quarterly GDP growth helped shift investor focus back to demand prospects for the raw material in theworld’s top steel producer.
China’s economy expanded 6.5 per cent year-on-year in the final quarter of 2020 and looks poised to expand further this year, lifting market sentiment dampened by the country’s fresh restrictions to curb the spread of Covid-19 infections.
The most-active May contract for iron ore on China’s Dalian Commodity Exchange rose as much as 2.5 per cent to 1,084.50 yuan ($167.29) a tonne, its strongest since December 22.
Iron ore on the Singapore Exchange gained 1.3 per cent to $171.36 a tonne.
China’s 2020 crude steel production rose to a record 1.05 billion tonnes as the economy’s reopening after the Covid-induced lockdowns boosted demand, and the euphoria looks set to continue, said Paul Gray, a Wood Mackenzie’s Vice-President.
“Vaccines, global economic recovery and tighter supply-demand fundamentals all point to a lucrative 2021 for steel and iron ore producers,” he said, predicting a modest decline in Chinese metal production later in the year.
While worries remain about fresh lockdowns in China, the economic impact will likely be muted, said Iris Pang, ING’schief economist for Greater China.
“Even if people do not go back to their hometowns during the Chinese New Year, the impact on consumption should be relatively small,” she said, adding those who would stay at their work locations would continue to consume.
Rebar on the Shanghai Futures Exchange rose 0.3 per cent,while hot-rolled coil slipped 0.2 per cent. Stainless steel climbed 1.7 per cent.
Dalian coking coal dropped 0.4 per cent, while coke slumped 1.4 per cent.