Since the end of September, the market has been showing significant growth amid the stimulus of the Chinese economy
Over the past week, September 30-October 7, 2024, the iron ore market experienced strong growth, fueled by new economic stimulus from China. Prices for raw materials continued to move upward, reaching a three-month high amid hopes of stabilizing the Chinese economy, particularly in the real estate sector.
January futures for iron ore, the most traded commodity on the Dalian Commodity Exchange during September 30-October 7, stabilized at 821.5 yuan/t ($117.14/t). Prices remained unchanged amid the Golden Week of holidays in China. At the same time, on the Singapore Exchange, the quotes of the basic November futures slightly decreased during this period – by 3.4%, to $108.2/t.
In late September, the Chinese government announced a new package of stimulus measures to support the construction sector. These included lower down payment requirements for home purchases and more favorable terms for loans. These steps boosted construction activity and increased demand for steel and iron ore, which had a positive impact on the commodity market.
However, even amid the optimism generated by the new incentives, investors remain cautious. The challenges facing the Chinese economy, in particular the high level of debt of developers, could lead to instability in iron ore demand in the medium term. Analysts also point out that for the market to grow steadily and sustainably, other sectors of the economy, such as manufacturing and technology, need to start showing recovery as well.
In general, the rise in iron ore prices over the past week reflects the market’s positive reaction to the Chinese government’s actions. However, further developments remain in doubt, as deeper structural changes in the Chinese economy are needed to maintain stable demand.
According to ANZ Research, iron ore prices will be in the range of $90-100/t by the end of 2024 amid weak Chinese fundamentals. According to the worst-case scenario, quotes will fall to $60-80/t.
British international commercial bank HSBC Holdings expects iron ore prices to reach $100/t in 2024. Capital Economics predicts that quotations for this raw material will vary at $99-100/t. By the end of next year, iron ore prices will fall to $85/t.
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