BEIJING: Dalian iron ore futures extended gains on Wednesday, buoyed by persistent support from prospects of more monetary stimulus and supportive measures to prop up a stalling post-pandemic recovery in the world’s second-largest economy.
New bank lending rose to 1.36 trillion yuan ($189.92 billion) in May, data from the People’s Bank of China (PBOC) showed on Tuesday, up from April but missed analysts’ estimates.
Signs of slowing momentum have raised expectations that more stimulus may be needed to sustain the recovery, analysts said. This came after earlier on Tuesday China’s central bank lowered a short-term lending rate for the first time in 10 months, cutting its seven-day reverse repo rate by 10 basis points to 1.90% from 2.00%.
“This signals that the Medium-term Lending Facility (MLF) and Loan Prime Rate (LPR) will also be lowered later,” analysts at Sinosteel Futures said in a note.
“Strong expectations of economic stimulus outweighed fundamentals changes.” Persistent hopes on supportive measures to the bumpy property market also supported upbeat sentiment.
“The measures are said to be focusing on lowering costs on outstanding residential mortgages and boosting re-lending through the nation’s policy banks to ensure homes are delivered,” analysts at the investment bank ANZ said in a note.
The most-traded September iron ore on the Dalian Commodity Exchange (DCE) traded 1.64% higher at 805.5 yuan a metric ton, as of 0255 GMT.
The benchmark July iron ore on the Singapore Exchange was little changed at $111.7 a metric ton, as of 0323 GMT.
Analysts warned of possible downside risks stemming from government interventions. China’s state planner has so far this year issued several rounds of warning in the face of increasing iron ore prices.
Coking coal and coke-the other steelmaking ingredients-climbed by 1.23% and 1.48%, respectively. Futures prices of steel gained on rising raw materials.
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