Iron ore futures rose on positive economic data from China due to higher steel consumptions and demand.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange rose by 1.91% day-on-day to RMB 801/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange also went up slightly by 0.89% day-on-day to RMB 3,719 per mt.
Higher PMIs signify economic recovery from pandemic
China’s Caixin/Markit Purchasing Managers’ Index (PMI) rose for the sixth consecutive month in October, implying the Chinese economy was growing amid the coronavirus pandemic.
In October, the private Chinese manufacturing-focused PMIs reached 53.6 readings, topping market expectation of 53, and better than September’s PMI readings of 51.5.
Official PMI also booked gains at 51.4 readings in October, slightly higher than market expectation of 51.3 reading, but lowered than previous month ratings at 51.5.
The official PMI normally tracked state-owned enterprises and grew for the eight consecutive months since the dip at 35.7 readings in February.
Higher steel consumptions before winter season
China’s steel consumption went up by 4% on-year to 720 million mt over the Jan-Sep period, according to China Iron & Steel Association (CISA).
The high consumption was attributed to Beijing policymakers’ economy stimulus plans through major investment projects as well as focusing on consumers’ products like automobiles and home appliances.
As such, the country’s vehicle production went up by 6.9% on-year to 1.21 million units over Oct 1-20 period, while output of home appliances like air conditioners, washing machines, freezers and refrigerators surged by 814% in September against the low Jan-Feb period.
However, some trade participants believed that high consumption rate was due to steelmakers trying to catch up production before the winter season in anticipation of slower construction activities ahead.