Iron ore prices rose on Monday, as cities across China followed in the footsteps of the central government. Following the central bank’s announcement of a jumbo stimulus program last week, authorities in three major cities have relaxed home buying restrictions. This has led to a greater optimism about the demand for steelmaking ingredients, despite the fact that concerns remain over the industrial sector.
Major cities follow PBoC in its footsteps
Iron ore prices dropped last week to their lowest levels since May 2023. In response to the stimulus package released by the People’s Bank of China, the industrial metal rose by almost 25%. It soared over 10% on Monday morning to levels seen in mid-July. The decision to loosen rules for home purchase was made by three major cities across the country.
The central bank announced a massive stimulus package last week to boost the economy. The central bank announced a jumbo stimulus package last week, which included lowering the interest rates on existing loans by 0.5% as well as reducing the minimum down payment on second homes from 25 to 15 percent.
In recent years, major cities have followed suit and introduced measures to boost the sentiment of homebuyers. Guangzhou’s government announced on Sunday that all restrictions regarding home purchases would be lifted as of Monday. Before this announcement, migrant family members had to pay six months of taxes or social insurance before they could buy two homes. A single person in this category could only buy one apartment.
Shenzhen’s government has also relaxed restrictions on home purchase. Buyers can now own an additional apartment in certain districts. Prior to this, singles and local families could only own one and two homes respectively. Families with at least 2 children can now buy up to two homes.
Shanghai has also announced a reduction in the required tax payment period, from three to one year. As of Tuesday, the city administration reduced its down payment ratio for starter houses to 15% and for second homes to 25%.
Beijing’s City Government is said to also be considering relaxing its home buying restrictions in certain districts. These positive measures aim to increase property sales throughout the region. Investors are confident that the demand for iron ore, a crucial ingredient in steel production, will increase dramatically.
Before the real estate crisis that lasted for several years, this sector contributed more than a quarter to the GDP of the country. The SGX TSI index of iron ore reached its highest level in May 2021, at $233 per tonne.
Share prices surge
NMDC’s shares jumped by more than 4% Monday, reaching their highest level since the 1st of August. At the time this article was written, the share value of India’s largest iron ore producer, NMDC, was 244.91 Rupees.
BHP Group shares also traded green for the sixth session in a row, reaching levels last seen in late May of 46.19 Australian Dollars. Rio Tinto’s share price rose to a new intraday high, 130.98 Australian dollars. This was a level that had not been seen since late May. Rio Tinto is the leading iron ore producer in the world. Its share price has risen by more than 22% since September, when it fell to an all-time low.
Analysis of iron ore prices
Iron ore prices have fallen to a low of $89.80 per tonne this month, as global economic concerns continue.
The price then jumped back up to $111.15 – its highest since July 5. The price has now moved up above the crucial support level of $98.05, which was its lowest swings in April and May this year.
The 50-day and the 100-day Exponential Moving Averages have also risen, indicating that bulls remain in charge for the time being.
Iron ore also has a head-and-shoulders chart pattern. This is a common bearish signal. This suggests that the rebound may be short-lived and that the trend could return to its downward direction. If this occurs, the next level to watch is at $90, which represents its lowest point in this month.
This post Iron ore Price Forecast: Rally could be Short-Lasted may be updated as new information unfolds
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