Iron ore prices rose slightly to reverse earlier intraday losses, supported by expectations of Chinese fiscal stimulus and supply reductions from smaller mining firms. Official data released on Tuesday indicated slow Chinese consumption alongside a worsening decline in investment.
Benchmark contracts recover
The most-traded iron ore contract on the Dalian Commodity Exchange rose 0.14 percent to close at 709 yuan per tonne, which is equivalent to $105.73 per tonne, after touching an intraday low of 704.5 yuan per tonne. The October iron ore benchmark contract on the Singapore Exchange advanced 0.27 percent to $95.7 per tonne, having earlier dropped to an intraday low of $95.05 per tonne.
Jacqueline Rong, Chief China Economist at BNP Paribas, said weak Chinese economic growth in August increased the likelihood of additional fiscal stimulus in the fourth quarter. Higher freight rates reduced profit margins.
Production cuts and inventories
Mining company Itaminas planned a supply reduction of 200,000 tonnes through a partial production suspension. Higher freight costs prompted lower iron ore supply.
Meanwhile, the China Iron and Steel Association urged domestic mills to strictly control production to lower high steel inventories. Forty-five major steelmakers backed the China Iron and Steel Association call, with China Baowu Steel Group among the industry participants.
Source: Dalian Commodity Exchange
