DCE rallies higher on tight supply and monetary policy
Iron ore futures closed higher upon better buying interest amid supply tightness of medium grade ores among dockside stocks.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange continued to rally higher by 3.48% or RMB 29 day-on-day to RMB 863 per tonne on Tuesday.
In the meantime, the steel rebar contract on the Shanghai Futures Exchange also went up by 0.71% or RMB 27 day-on-day to RMB 3,848 per tonne.
Rising weekly iron ore shipments from Australia and Brazil
The iron ore rally refused to ease despite higher shipment volumes from Australia and Brazil, that grew for the second week in August over the Aug 10-16 period.
According to Mysteel, the Australian iron ore shipments exported 18 million mt from its ten ports, up 9.3% week-on-week, while the Brazilian shipments were recorded at 7.7 million mt last week, up 620,000 on weekly basis.
Despite the growing shipments, some market participants were concerned over port congestion in China, which might delay the unloading of cargoes as there was a long vessel queue with an increase of 80-90 vessels since March.
More accommodative monetary policy from China
The paper market rally was also partly driven by the fresh injection of funds from China’s central bank at around RMB 700 billion or $101 billion into the economy.
The injection was made through China’s medium-term lending facility with effect on Monday, and it could prelude interest-rate cuts or other, more potent easing measures.
Moreover, an RMB 2 trillion worth of special transfer payment mechanism was set up, allowing new funds go straight to prefecture and county-level governments in quick manner.
By early August, it was estimated that around 97.8% of this fund had been distributed to prefecture and county-level governments to stimulate the coronavirus-hit economy.