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Dalian iron ore futures climbed on Wednesday, while the Singapore benchmark price for the steelmaking ingredient extended gains, following the Chinese central bank’s move to inject additional liquidity into the banking system.
The People’s Bank of China (PBOC), as expected, boosted medium-term liquidity on Wednesday, with the operation resulting in a net 199 billion yuan ($29.06 billion) of fresh fund injection while keeping the interest rate unchanged.
Markets had hoped the PBOC would pump more cash into the banking system after money conditions became unexpectedly tight at the start of February and to support the economic recovery after Beijing dismantled strict COVID-19 curbs.
The most-traded May iron ore on China’s Dalian Commodity Exchange ended daytime trade 2.2% higher at 865.50 yuan a tonne, after hitting 873 yuan earlier.
On the Singapore Exchange, iron ore’s benchmark March contract was up 0.9% at $123.55 a tonne, as of 0717 GMT, off a session high of $124.30.
Most steel benchmarks on the Shanghai Futures Exchange and other Dalian steelmaking inputs also advanced.
Rebar SRBcv1 and hot-rolled coil SHHCcv1 both climbed 1.5%, while wire rod SWRcv1 added 0.6%. Stainless steel SHSScv1 slipped 0.1%.
Coking coal DJMcv1 and coke DCJcv1 rose 1.4% and 0.6%, respectively.
The liquidity boost in top steel producer China followed an increase in new bank loans in January to a record 4.9 trillion yuan.
But analysts said Chinese ferrous commodities’ prices may remain range-bound as market fundamentals offer not much support at the moment, with the country’s iron ore port inventory at a five-month peak and the optimism around Chinese steel demand tempered by a subdued property market.
“Chinese demand is expected to be broadly flat with the weakness in China’s property market offset by a pick-up in infrastructure,” said Westpac senior economist Justin Smirk who expects iron ore prices to settle at $100 a tonne by yearend.