Iron ore futures rose further upon news of special bonds issuance to be completed by end-October, according to the China’s Ministry of Finance.
Thus, the most-traded iron ore for September delivery on China’s Dalian Commodity Exchange went up by 1.02% or RMB 8.50 day-on-day to RMB 840 per tonne on Thursday.
The steel rebar contract on the Shanghai Futures Exchange then hiked up slightly by 0.51% or RMB 19 to RMB 3,767 per tonne.
Further stimulus of infrastructure via special bonds
Beijing policymakers had pushed the remaining special bonds worth RMB 1.51 trillion or $220 billion for completion by Oct 31.
Initially, a total of RMB 3.75 trillion special bonds was launched to support infrastructure projects for 2020. As of July 14, almost 60% or RMB 2.24 trillion of the special bonds had been issued with the remaining 40% for issuance till year-end.
However, the central government had accelerated the completion of special bonds by end-Oct, which the market participants interpreted as a meant to stimulate the coronavirus-hit economy.
Thus, the market reacted favorable to the issuance of these special bonds as they supported various infrastructure projects like transportation, energy, agriculture, which in turn meant more steel consumptions.
FMG shipment reached an all-time high and raise guidance
Due to robust Chinese steel demand, Australia’s FMG exported a total of 178.2 million tonnes for its fiscal year ended in June 2020, an all-time high after toppling previous record of 170.4 million mt in 2017.
During the Apr-Jun 2020 quarter, the miner shipped a record-high 47.3 million tonnes of iron ore, beating market estimate, amid the coronavirus pandemic.
The increased shipments were linked to high iron ore prices above the $100/mt level during the Jun-Jul period that prompted miners to ramp up production to meet Chinese demand.
Therefore, FMG announced to raise its iron ore shipment guidance slightly to 175-180 million wet tonnes for the next fiscal year or July 2020-June 2021, from previous annual guidance of 175-177 million wet tonnes.