China’s Stimulus Measures Drive Iron Ore Prices Up

Iron ore prices rose on Thursday as Chinese government’s stimulus measures are expected to revitalize the economy from a recent resurgence of COVID-19 cases. Benchmark 62% Fe fines imported in to China traded at $152.25 a tonne during morning trading, up 1.06% from Wednesday.

The Chinese government on Wednesday said it would use timely cuts to reserve requirement ratios and other policy tools to support the economy, as well as industries and small companies hit by the pandemic.

China’s most populous city and commercial center Shanghai has locked down its 25 million people for almost three weeks as the government tries to contain the country’s biggest outbreak of coronavirus since it was first identified in Wuhan in late 2019.

The restrictions in major Chinese cities have started to ripple through the global supply chain. Some factories are forced to shut down and ports have become increasingly congested.

Some Chinese cities have started to ease their property sales policies. Real estate sales are going up, and the market is now waiting if the momentum will transfer to the property development sector.

Steel demand is also expected to recover in the second half of 2022 but prices of raw materials for steelmaking, such as iron ore, coke and steel scrap is still high and tightens the mills’ profit margins.

Global steel demand is expected to grow 0.4% to 1.84 billion tonnes this year, slowing down compared to a 2.7% gain in 2021, caused by the uncertain outlook created by the conflict in Ukraine.

Higher energy and commodity prices, especially steel raw materials as well as continued supply chain disruptions will further trouble the steel industry which was already having a hard time even before the war.

Demand in China, which accounts for about half of global steel consumption, is now expected to remain flat this year.

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