October 1, 2024

China’s stimulus' impact on iron ore, steel prices and other commodities

Iron Ore & Steel: China’s stimulus supports iron ore and steel prices

Global seaborne iron ore exports reached 34.49 Mt in the week beginning 16 September, marking the second-highest volume since July. The increase was primarily due to miners accelerating shipments as the financial quarter draws to a close, particularly those who had curtailed exports in July and August owing to maintenance schedules and subdued demand from China.
In China, steel output has been continuing to edge higher from the late-August low, with output from China Iron and Steel Association (CISA) members reaching 1.99 Mt/day between 11 and 20 September. However, this remains the fourth-lowest reading so far in 2024 and represents a substantial decline from the 2.13Mt/day during the same period last year. In the short term, we expect output to continue its recovery, particularly as traders intensify their restocking efforts for rebar, with the destocking of old-standard rebar nearing completion. The new rebar quality standards have been in effect since 25 September. However, we continue to expect China’s crude steel output to witness a modest y/y decline across the entirety of 2024.
In response to the ongoing economic slowdown, Beijing unveiled a fresh round of stimulus measures on 24 September. These include simultaneous cuts to policy rates and the reserve requirement ratio (RRR), which will lower borrowing costs and enable banks to expand lending. For the property market, interest rates on existing mortgages will be cut further, and the minimum down payment on all homes will be reduced to 15%. We believe that these measures would mainly boost market sentiment and stabilise the real estate market rather than increase underlying demand as we believe there is still a long way to go before sentiment among Chinese homebuyers picks up.
Iron ore and steel prices have been supported by the stimulus announcements. The most actively traded January 2025 iron ore contract on the Dalian Commodity Exchange (DCE) jumped by 6.23% on 24 September and rose by another 1.36% to 709 yuan ($100.82/t) on 25 September (+5.03% w/w), just after closing at the lowest since November 2022 at 658.50 yuan/t ($93.65/t) on the previous trading day. The benchmark rebar and hot rolled coils (HRC) prices at the Shanghai Futures Exchange (SHFE) also surged by 4.21% and 4.20%, respectively, on the same day. At business close on 25 September, these two edged up by 2.38% and 3.44%, respectively, to 3,225 yuan/t ($458.60/t) and 3,306 yuan/t ($470.12/t).