Iron-Ore Swaps Highest Since July on China Rate Cut Speculation

Iron-ore swaps rose to the highest since July on speculation China may cut the amount of cash banks have to keep in reserve, helping purchases of the commodity used to make steel, according to SSY Futures Ltd.

November contracts rose 2.6 percent to $116.50, the highest since July 31, Jamie Pearce, head of iron ore and freight at SSY in Singapore, said in an e-mail today. Trading of the derivatives will more than triple this year as investors use them to bet on Chinese economic growth and steel demand, broker Freight Investor Services Ltd. estimates.

Swaps rose on speculation China’s central bank may lower the reserve-requirement ratio for lenders, Pearce said. Domestic steel prices also rose, he said. Steel reinforcement-bar futures climbed to the highest close in almost 12 weeks.

Growth in the world’s second-largest economy slowed for a seventh quarter, expanding 7.4 percent in the three months to September from a year earlier, the National Bureau of Statistics said Oct. 18, matching the median estimate in a Bloomberg survey. China’s central bank cut interest rates in June and July for the first time since 2008 and has reduced banks’ reserve requirements three times since November.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net