China's iron ore futures recouped early losses on Wednesday as a jump in bank lending spurred hopes that economic activity may see a pick-up up and boost demand.
Benchmark iron ore futures contract on the Dalian Commodity Exchange, for May 2020 delivery, dropped as much as 1.5% to 645 yuan ($91.63) per tonne. It clawed back to 659 yuan per tonne at close, up 0.5%.
Chinese banks extended 1.39 trillion yuan in new yuan loans in November, rising sharply from October and beating analysts' expectations, according to data released by China's central bank on Tuesday.
Steel futures on the Shanghai Futures Exchange also gained following more household loans last month, though several analysts believed the rise was largely due to seasonal factors.
Construction steel rebar futures, for May 2020 delivery, rose 0.7% to 3,537 yuan per tonne.
January hot-rolled coil contract, used in cars and home appliances, jumped 1.5% to 3,735 yuan per tonne.
"Chinese demand for ferrous metals should be better supported in 2020 on the back of robust construction activity," Fitch Solutions Macro Research wrote in a note. "As the government continues to roll-out targeted stimulus measures to offset rising headwinds to the domestic economy."
Other steelmaking ingredients fell. Dalian coking coal dropped 0.6% to 1,236 yuan per tonne and Dalian coke fell 0.4% to 1,918 yuan per tonne.
Shanghai stainless steel futures, for February 2020 delivery, gained 1.6% to 14,200 yuan per tonne.
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