(Bloomberg) -- Iron ore futures held above $130 a ton as China’s pledge to spur the economy bolstered demand prospects for the raw material, while near-term risks loomed as Beijing targets blue skies for the Winter Olympics.
The consumption outlook for the steelmaking material has come into focus as China repeated a call this week to front-load infrastructure investment to help the economy, which has been dragged by a property downturn and mounting credit stress. Chinese lenders lowered borrowing costs for a second straight month, following the central bank’s move to cut policy loan rates on Monday.
“We view this week’s rate cuts as a pre‑emptive move to drive a growth rebound in 2022,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, said in a note. However, steel output cuts -- a major driver of iron ore prices in second half of 2021 -- are likely to feature again this year as China continues to look at reducing emissions from the steel sector, he said.
Mysteel estimates that utilization rates of blast furnaces will drop to about 55% in the key steel-making hub of Tangshan in China in February and March. It also expects rates to fall in the Shandong and Henan provinces.
Iron ore futures in Singapore rose 0.7% to $131.50 a ton by 12:05 p.m. local time. Prices in Dalian edged 0.2% higher, while steel rebar and hot-rolled coil fell 0.3% in Shanghai.
©2022 Bloomberg L.P.
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