The price of iron ore jumps 10% in the hope of global economic recovery

Iron ore prices jumped more than 10% in Asian trade on Monday with rising expectations that the global economic recovery from the Covid-19 pandemic would extend beyond China and boost commodity markets.

Future iron ore prices in Singapore rose to more than $ 226 per tonne, a record in dollar terms. In Dalian, China’s main commodity trading center, the price of the most active futures contract also rose 10%.

The rise in prices continued to race of recent highs for the steel ingredient, which along with other raw materials has been supported by strong demand for a rapidly recovering Chinese economy, and is also expected to benefit from government support measures around the world .

“It simply came to our notice then. . . it’s all the strength of the global steel industry recovery, ”said Justin Smirk, a senior economist at Westpac.“ I think the reality is that the market is still incredibly tight, we still have steel prices very, very strong “.

In China, steel production jumped 19% in March despite Beijing’s efforts repress production while the government strives to achieve its environmental goals.

From China imports have increased to the appetite for raw materials, along with a jump in their exports. Data released on Friday showed that imports grew 43% in April from year to year, although this was partly due to last year’s low base, when the pandemic hit world trade.

He robust recovery of the Chinese economy, which returned to pre-pandemic growth rates late last year, lost some momentum during the first quarter. Iron ore imports in April fell compared to March.

Trade exports of iron ore from Australia to China have come under control due to geopolitical tensions resulted in tariffs in shipments such as barley, beef and wine.

Michael Lovecchio on the StoneX brokerage speculated on whether the iron price jump could be attributed to underlying market demand, “Chinese / Australian tensions worsening” or “simply Chinese retail speculation”.

Commodities in China have raised producer prices this year, with data released on Tuesday it is expected to show a jump of more than 6 percent. China recorded a negative PPI between the outbreak of the pandemic last year and the beginning of 2021.

Warren Patterson, head of commodity strategy at ING, suggested that the inflation outlook was driving commodity demand by investors.

Iron ore is “a real asset, so it is seen as a good hedge for inflation. . . I think that’s why we’re seeing a lot of money from investors going to commodities, ”he said.

“We definitely get to levels where I think price action is detached from the real fundamentals,” he added.