Iron ore futures rallied on looser monetary policy, higher iron ore import figures and expectation of better economic policy plans for the next year.
The futures of Dalian Commodity Exchange (DCE) for January delivery then jumped up by 8.07% day-on-day or up RMB 48 to RMB 643/mt, during the day trading session on Tuesday.
The rebar futures also went up by 1.30% day-on-day or up RMB 57 to RMB 4,450/mt, during the day trading session.
Monetary policy to boost market sentiments
Market confidences were high, after the China’s central bank or People’s Bank of China (PBOC) reduce most banks’ reserve requirement ratio (RRR) by 0.5 percentage point with effect on Dec 15, releasing RMB 1.2 trillion or around $190 billion into the banking system.
Moreover, there was also signal of an easing in curbs on real estate in 2022 by the Beijing policymakers, to kickstart the sector after a slowdown of construction activities due to debt-ridden Evergrande Group.
Besides, market participants were optimistic for more stimulus measures to stabilizing macroeconomic conditions as Beijing policymakers met later in the month for Central Economic Work Conference.
Higher iron ore imports to meet rising steel production
China’s iron ore imports also grew in November, reaching 104.96 million mt, up 6.9% on-month, according to the country’s General Administration of Customs.
Some trade participants expected the imports to rise during December, as more output restrictions were relaxed and thus enabling more steel output to consume iron ores.
However, some market participants were concerned that the high portside inventory may offset the needs to import more iron ore, as port inventory stood at nearly a three year high at 155.5 million mt as of early December.