Iron ore futures in Dalian and Singapore increased on Monday as a result of China lowering its benchmark lending rate to assist the country's economy, but it is anticipated that the price increase would be fleeting given the hazy demand forecast.
In an effort to revitalise an economy hampered by a property crisis and a rise in COVID-19 cases, China reduced its benchmark lending rate as well as the mortgage reference by a larger margin, adding to softening measures of last week.
The most-traded September contract on the Singapore Exchange increased 2.3 percent to USD 103.10 per tonne.
The Dalian Commodity Exchange's most traded January iron ore price increased by max 2.6 percent to 698 yuan (USD 102.3) per tonne before dropping to trade 2.1 percent higher at the Asia midday break due to demand prospects remained gloomy.
Managing director at Navigate Commodities in Singapore, Atilla Widnell, expressed: "The heat wave and the record high temperature (in China) still exist so that's destroying construction steel demand. You still got COVID. People are still not on the streets consuming steel intensive goods.”
"In normal times, a rate cut would have been like a five-time rally. The problem is, we're in a sort of a liquidity trap. The government's pumping out more fiscal stimulus and it's not getting to the right places,” he continued.
Last week, Dalian iron ore had its largest weekly loss in five weeks, falling on each trading session. From their record high of 1,196 yuan (USD 175) per tonne in May 2021, prices have fallen by over 40%.
The demand for iron ore has also been reduced by Chinese steelmakers' increased use of scrap steel, and prices have been impacted by increasing import iron ore stocks at Chinese ports, which have reached a three-month high.
However, Widnell argues a sharp decline in iron ore prices is not necessary as inflation has increased the costs of mine production.
Coke declined 2.7 percent while Dalian coking coal gained by 2.7 percent.
On the Shanghai Futures Exchange, while Rebar increased 0.2 percent, hot-rolled coil increased 0.6 percent. Stainless steel grew by 0.7 percent.
The materials and information on this article have been prepared or assembled by Viet Nam Steel and are intended for informational purposes only.
