Iron ore rallies on China stimulus hopes ahead of key political meeting

Iron ore prices rose to the highest level in almost a month as traders bet on a slight improvement in China's steel industry. Futures in Singapore climbed for a fourth day in a row, adding over 6 per cent in total this week on improved hopes for further demand and a stimulus boost ahead of next week's Third Plenum—a major Chinese political meeting.

The steelmaking ingredient is now solidly above $110 a ton, having spent most of June below that level. Iron ore has recovered from under $100 a ton in June after the Chinese government announced a rescue package for the property sector, which is crucial to the economy. However, the real estate outlook remains uncertain, and all attention is now on the policies to be outlined in mid-July during the Third Plenum, with China Communist Party leaders turning to long-term goals.

The Chaos Ternary Research Institute also noted that Chinese mills remain eager for iron ore, with furnace run-rates several high and lately, there has been a glimmer in Chinese steel demand. Overall, the near-term economic prospects for China continue to strengthen ahead of the upcoming July meeting, adding an extra cushion for iron ore.

As of 11:35 a.m. local time, futures in Singapore traded little changed, at $113.45 a ton, after earlier this session coming 0.4 per cent higher. Meanwhile, Dalian prices lost ground, and steel futures in Shanghai remained almost flat.

This recovery in the iron ore price depicts the market trading with some hope that policymakers in China will accelerate the process now, after the outcomes of the Third Plenum, which could put a proper floor under steel and property prices at last.