Iron ore climbed the most in seven months, trimming a quarterly drop, on speculation that China may speed up construction projects and take measures to counter slowing economic growth in the world’s largest buyer.
Ore with 62 percent content delivered to the Chinese port of Tianjin climbed 4 percent to $116.80 a dry ton yesterday, the biggest gain since Aug. 12, according to The Steel Index Ltd. That trimmed the quarterly decline to 13 percent, the most since the three months through June 2013 and the biggest first-quarter loss since 2009, Steel Index data show.
Iron ore fell into a bear market last month on speculation that slowing economic growth and credit crunch in China may curb the expansion in demand just as global supply increases. BHP Billiton Ltd. and Rio Tinto Group predict lower prices this year after miners spent billions of dollars to boost output. Banks from Citigroup Inc. to Standard Chartered Plc predict a surplus, and Goldman Sachs Group Inc. listed iron ore among its least-preferred commodities for 2014.
“Sentiment was stronger on the back of increased interest from Chinese steel mills and growing anticipation of supportive Chinese policy,” Australia & New Zealand Banking Group Ltd. analysts led by Mark Pervan wrote in a note today. “The gains were despite a further rise in port inventories last week; however the 38,000 ton build last week was the smallest in several weeks.”
Chinese Premier Li Keqiang is under pressure to take steps to address weakening economic expansion amid deepening concern that the nation will miss its 7.5 percent growth target this year, the weakest annual pace since 1990. China will accelerate preliminary work and construction of key investment projects, the State Council, or cabinet, said March 19.
Stockpiles of the steel-making raw material at Chinese ports increased to a record 103.77 million tons in the week ended March 28, according to Beijing Antaike Information Technology Development Co. Inventories have climbed 28 percent this year, the data show.
“The extent to which prices are merely supported or manage to stage any kind of more material rally will likely be determined by the magnitude of recently-announced Chinese stimulus measures,” Credit Suisse Group AG said in a report yesterday. “The underlying mismatch between supply growing at 11 percent and demand advancing at closer to 4 percent should leave iron ore prices very vulnerable to further falls,” it said, predicting prices below $100 a ton in the second half.
New iron ore supply from Australia may total 92 million tons this year, pressuring prices in the second half, Standard Chartered said March 25. The bank predicts a global surplus of 136 million tons in 2014, increasing to 170 million tons in 2015, from a 77 million ton deficit last year, it said Feb. 13. Citigroup predicts a 67 million-ton surplus this year.