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Iron Ore Advances to One-Month High on Chinese Demand Outlook

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January 6, 2015

By Jasmine Ng

(Bloomberg) — Iron ore climbed to the highest in a month on speculation China’s plans to speed up $1.1 trillion of infrastructure projects this year will boost demand amid a decline in port inventories in the world’s largest user.

Ore with 62 percent content delivered to Qingdao, China, rose 0.9 percent to $71.49 a dry metric ton today, the highest since Dec. 5, data from Metal Bulletin Ltd. show. Prices slumped to $66.84 on Dec. 23, the lowest level since June 2009, and last week rebounded 5.8 percent.

While the raw material lost 47 percent last year as global output expanded, it opened 2015 with the biggest weekly gain in 18 months amid speculation China will take more steps to spur growth. The country is accelerating 300 infrastructure projects this year as part of a broader 10 trillion yuan ($1.6 trillion) plan that will run through 2016, according to people familiar with the matter. A sixth week of decline in port stockpiles signal that imported supplies are being absorbed.

“Current prices of around $65 to $75 a ton could prove to be a low point for iron ore,” Paul Bloxham, chief Australia economist at HSBC Holdings Plc in Sydney, said today before the price data was released. “The fall in port inventories is a positive sign as the restocking process should support iron ore price in the coming months.”

Stockpiles at Chinese ports shrank 0.9 percent to 100.6 million tons as of Jan. 2, according to Shanghai Steelhome Information Technology Co. That’s the lowest level since Feb. 14, and a sixth weekly drop is the longest run of declines since April 2013. Inventories contracted 12 percent since peaking at 113.7 million tons in July.

China’s investments will be across seven industries including oil-and-gas pipelines, transportation and mining, according to people familiar with the matter, who asked not to be identified. The world’s second-largest economy, which cut interest rates in November, buys two-thirds of seaborne ore.

(c) 2015 Bloomberg.

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