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Dalian iron ore futures extended gains on Wednesday, buoyed by persistent support from prospects of more monetary stimulus and supportive measures to prop up a stalling post-pandemic recovery in the world’s second-largest economy.
New bank lending rose to 1.36 trillion yuan ($189.92 billion) in May, data from the People’s Bank of China (PBOC) showed on Tuesday, up from April but missed analysts’ estimates.
Signs of slowing momentum have raised expectations that more stimulus may be needed to sustain the recovery, analysts said.
This came after earlier on Tuesday China’s central bank lowered a short-term lending rate for the first time in 10 months, cutting its seven-day reverse repo rate by 10 basis points to 1.90% from 2.00%.
“This signals that the Medium-term Lending Facility (MLF) and Loan Prime Rate (LPR) will also be lowered later,” analysts at Sinosteel Futures said in a note.
“Strong expectations of economic stimulus outweighed fundamentals changes.”
Persistent hopes on supportive measures to the bumpy property market also supported upbeat sentiment.
“The measures are said to be focusing on lowering costs on outstanding residential mortgages and boosting relending through the nation’s policy banks to ensure homes are delivered,” analysts at the investment bank ANZ said in a note.
The most-traded September iron ore on the Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trading 1.51% higher at 804.5 yuan a metric ton.
The benchmark July iron ore SZZFN3 on the Singapore Exchange was, however, 0.1% lower at $111.55 a metric ton, as of 0805 GMT.
Analysts warned of possible downside risks stemming from government interventions.
China’s state planner has so far this year issued several rounds of warning in the face of increasing iron ore prices.
Coking coal DJMcv1 and coke DCJcv1 – the other steelmaking ingredients – climbed by 2.77% and 2.86%, respectively.
Futures prices of steel gained on rising raw materials. Rebar on the Shanghai Futures Exchange SRBcv1 rose 1.08%, hot-rolled coil SHHCcv1 added 1%, wire rod SWRcv1 gained nearly 2% and stainless steel SHSScv1 grew 1.22%.