Iron-ore bounces back to six-week high on trade-war truce hopes
Iron-ore rose as trade tensions eased, spurring optimism across a metals market that has been hit especially hard by global growth worries.
Futures of the steel-making ingredient reached a six-week high, climbing nearly 2%, as the temporary truce in the US-China trade war held and US President Donald Trump said he is trying to open up the Asian country to American businesses. China also said substantial progress had been made in the talks, according to a coordinated joint statement on Monday.
Despite this week’s bounce, the ferrous market — which comprises steel and its raw ingredients — has been battered by the trade war as worries about the global economic outlook exacerbated the impact of weaker steel demand and upcoming production cuts in China. Even if the truce with the US holds, those concerns are set to linger.
Iron ore prices “continue to be hit by a bleak demand outlook, while renewed optimism over potential trade deals and Mainland China’s stimulus measures is likely to offer support, limiting the downside,” analysts at BMI, a Fitch Solutions Company, said in a research note on Tuesday.
China’s potential stimulus measures could lead to a temporary boost to demand for steel, according to Bloomberg Intelligence, which predicted they may result in a 0.5% lift over the next two years compared with a consensus for a decline of as much as 3%.
“After four years of a flat-to-falling market, the country’s property market has started to stabilize while further stimulus supports other sectors,” BI analyst Grant Sporre said in a note. He added though that a mature industrialization cycle meant China’s steel demand still could be in a structural decline.
Iron ore futures in Singapore were up 1.5% to $101 a ton at 10:50 a.m. local time, while yuan-priced futures on the Dalian exchange rose more than 2.5%. Shanghai steel contracts advanced.
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