(Bloomberg) -- Iron ore futures in Singapore were on track for the first weekly advance in five as China’s move to slash borrowing rates and shrinking stockpiles of the steelmaking raw material buoyed sentiment. Base metals also rose.
Futures in Singapore surged more than 6% after midday trading, marking its largest daily increase since mid-March. Chinese banks cut a key interest rate for long-term loans by a record amount on Friday, a move that would reduce mortgage costs and may help counter weak loan demand. Meanwhile, iron ore stockpiles at major Chinese ports dropped for an eighth consecutive week, according to Mysteel data compiled by Bloomberg.
The nation’s Covid Zero strategy and a prolonged property slump have damped demand in the construction sector, a key pillar of steel consumption. Steel rebar output fell this week amid lower margins, China’s pledge to cap annual production, the rainy season and virus controls, according to a Mysteel report, citing its own survey of 137 mills in the nation.
While “the stringent virus restrictions have reduced market confidence,” a return of consumption can be expected in the medium-term as China unleashes stimulus, Huatai Futures wrote in a note.
Read: China’s Stimulus Tops $5 Trillion as Covid Zero Batters Economy
Iron ore futures in Singapore was up 6.2% to $134.30 a ton as of 3:16 p.m. local time, on course for a 5.7% gain this week. Prices in Dalian climbed 3%. Steel rebar futures in Shanghai were poised for a fifth weekly decline.
Copper rose 0.4% to $9,452 a ton on the London Metal Exchange, putting the metal on track for its first weekly gain in seven. Aluminum is up 5.6% this week.
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