Iron ore climbs to over 2 week high on prospects of more China stimulus

Iron ore futures climbed on Tuesday to their highest levels in more than two weeks, underpinned by growing optimism over further stimulus from top consumer China, although fundamentals of the key steelmaking ingredient remained weak.

 

The most-traded January iron ore contract on China's Dalian Commodity Exchange (DCE) ended daytime trade 2.53% higher at 791 yuan ($111.33) a metric ton. It hit the highest since Oct. 17 at 798 yuan a ton earlier in the session. 

The benchmark December iron ore on the Singapore Exchange added 1.09% at $105.05 a ton, as of 0711 GMT, also the highest since Oct. 17. 

Chinese lawmakers reviewed a cabinet bill that would raise ceilings on local government debt to replace existing hidden debt as the standing committee of China's top legislature started its meeting on Monday, state media Xinhua reported. 

That was interpreted by the market as a positive sign, as the heavy burden of local government debt has weighed on investment and economic growth. 

"Expectations are rising that this week's meeting of the National People's Congress Standing Committee will provide new details of fiscal stimulus measures," ANZ analysts said. 

Reuters exclusively reported last week that China is considering approving new debt issuance of more than 10 trillion yuan to tackle hidden local government debt, fund buybacks of idle land and reduce a giant inventory of unsold flats.

China's services activity expanding the fastest in three months in October, following the unexpected manufacturing activity expansion, has further boosted overall sentiment. 

Other steelmaking ingredients on the DCE gained, with coking coal and coke up 1.57% and 1.97%,

respectively. 

Most steel benchmarks on the Shanghai Futures Exchange were higher. Rebar added 1.3%, hot-rolled coil advanced 1.07%, wire rod ticked 0.33% higher, while stainless steel shed 0.26%. 

Analysts at Galaxy Futures, however, are not too optimistic about the benefits of the expected fiscal policy to steel demand, saying that even if it's introduced, it's expected to be mainly used in dissolving debts, supplementing bank capital and consumption.