Iron Ore Prices Jump On China Property Optimism

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by Tyler Durden
Tuesday, Nov 23, 2021 - 06:40 PM

Iron ore futures trading in Singapore have bounced back above $100/ton after a series of positive announcements over the last week, from potential loosening of monetary policy to easing of regulations for China's property sector. This has sparked optimism that China's troubled property sector could soon boost steel demand. 

Prices in Singapore have soared as high as 22% to $104 handle in just four sessions. As of Tuesday, prices faded and hovered around the $100 mark as a turnaround in the demand outlook is being priced in.

The surge in price is being led by increasing optimism that easing property-market curbs could soon lift steel demand and improve profitability for steelmakers. There's also chatter the People's Bank of China could unleash stimulus amid the economic growth slowdown in the world's second-largest economy after this year's vicious regulatory crackdown by Beijing. 

"The market has higher expectations for steel production to resume," Huatai Futures Co. wrote in a note. Property is a leading source of steel demand in the country. 

Iron ore prices have been on a rollercoaster this year after surging to a record in May as Beijing unleashed steel output limits to curb pollution and emissions for smelters. The rally then faltered by late summer as Beijing unleashed a crackdown on the property sector -- a key source of steel demand, in return, hurt the outlook for consumption.

On the macro front, positive developments are appearing as the PBoC could be close to easing and Beijing dials back on regulatory crackdowns. Institutional investors are also getting in on the action as China's high-yield bonds have had a bid this month. 

It appears the Chinese government would prefer to have a healthy property market and economy (or at least one that isn't imploding) ahead of the upcoming Beijing 2022 Olympics.