Seaborne iron ore prices extended their rebound on Tuesday as recovering confidence pushed futures markets higher. Expectations for the Chinese economy have also bottomed out, and the level of pessimism in markets is easing.
The Kallanish KORE 62% Fe index gained $8.05/t to $149.70/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index increased $7.83/t to $174.26/dmt cfr, but the KORE 58% Fe index slipped another $0.48/t to $118.51/dmt cfr. 170,000 tonnes of PB fines traded at a floating price.
On the Dalian Commodity Exchange January 2022 iron ore settled up CNY 17.5/t at CNY 787.5/t ($121.44/t), while on the Singapore Exchange September 62% Fe futures settled up $12.69/t at $148.10/t. The same contract for 65% Fe and 58% Fe futures settled up $12.25/t at $168.30/t, and down $1.01/t at $110.51/t respectively.
Scrap and billet prices also moved higher on Tuesday. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta regions gained CNY 5/t from Monday to CNY 3,717/t. In Tangshan, billet prices gained CNY 20/t to CNY 4,930/t.
In addition to expectations that the $25.55/t sell off in iron ore on 19 August was exaggerated, markets have been bolstered by expectations for domestic demand. Steel demand and production is still expected to be low in the second half-year, but expectations had become so pessimistic that they are also now readjusting.
China has said it will aim to support a healthy level of credit growth to stimulate the economy in the second half of the year. Although this is so far only a rhetorical support, it marks a shift from the previous focus on tight credit control.
Fears over China’s Covid-19 outbreaks meanwhile have also eased. More cities are easing restrictions and infection rates have slowed. Officials say they could achieve an 80% immunity rate by the end of the year, taking China very close to achieving heard immunity. Vaccination rates have increased as local governments provide new incentives for the vaccinated and penalties for those who do not accept the vaccine and go on to infect other people.