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China’s Credit Growth Boosts Confidence In Iron Ore Markets

  • Iron ore prices jumped to over US$117 per ton, fueled by positive economic trends in China and hopes for forthcoming stimulus measures.
  • Chinese credit growth accelerated in August, with commercial bank lending rising by over 11% year-on-year.
  • Goa, India introduces a new policy to manage its vast low-grade iron ore reserves, planning to export 25 million tons annually.

Via Metal Miner

According to this report, the most-traded January iron ore on China’s Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trading 2.41% higher at 851.5 yuan (US$116.80) a metric ton.

The next day, the iron ore price index surged by 4%, surpassing US $117 per ton. Trader optimism largely fueled the price jump, as many felt encouraged by the surprising economic data and the anticipation of additional stimulus measures for the country’s property sector (the impact of this on 2024 metal prices is covered in the 2024 Annual Metals Outlook). Meanwhile, in Singapore, benchmark iron ore futures for cash settlement in October reached $US117.90 per ton. This compared to just US$101.65 a ton for equivalent contracts one month ago. 

Good China News Driving Iron Ore Price and Demand

In August, total Chinese credit growth saw a year-on-year increase of 9%, compared to the 8.9% registered in July. This was the first month-on-month acceleration since March. What made the markets even happier was the fact that commercial bank lending in the past month soared by over 11% compared to the same period the previous year.

That said, analysts feel speculators engaged in futures contracts continue to bet on the belief that Beijing’s forthcoming stimulus measures would result in elevated prices in 2024. This, of course, remains to be seen.

Meanwhile, Chinese steel production registered a robust performance in July, going above 2.9 million tons per day. This continues to drive the demand for physical iron ore, bringing additional supplies of high-cost iron ore into the market to meet China’s needs.

Goa to Export Iron Ore

While China looks around for high-end ore, the Indian province of Goa recently approved a new policy to regulate the handling of iron ore dumps. With the new policy in place, the government now has a roadmap to handle the 700 million tons of low-grade iron ore sitting in mining lease areas across the province. Currently, it plans to export 25 million tons per year.

It’s noteworthy that the policy excludes those successfully auctioned iron ore dumps. Rather, it prioritizes dumps that are either located near bodies of water, positioned by sensitive environments, or are unstable in some way.

The Indian state will auction the dumps according to a specially-devise e-auction policy. However, before any auctions take place, the directorate of mines and geology will conduct a study on each deposit.

By Sohrab Darabshaw

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  • George Doolittle on September 13 2023 said:
    Oil prices this high will have a dramatic impact on both natural gas supplies (much higher) and prices (much lower in the USA anyways.) Using such still now today cheap and voluminous natural gas to both further production of steel in the USA (Texas and Toledo) but presumably same said be true now globally as well excepting China which still remains wholly dependent upon coal as The Resource from which steel be have had created. As such hard not to see this as with oil as a "suckers rally" especially given what continues to be the ongoing catastrophe for commodity traders that is Putin Russia War.

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