China's iron ore futures have increased on expectations of a recovery in China's real estate sector, a key driver of demand for the steelmaking ingredient.

 

On December 27, the most-traded contract on the Dalian Commodity Exchange closed at 985.5 yuan/t, up 0.51% from a day earlier. A day ago, the contract jumped over 2% to near the 1,000 yuan/t-mark before falling back to close at 980.5 yuan/t.

 

The iron ore futures on the SGX touched $140/t on December 26, the highest in 18 months.

 

The strong gains over the past four months have pushed iron ore prices up 34% from mid-August lows.

 

The continuous price hikes have drawn close attention at the end of the year. A widely-recognized view was that signs of stimulus from Beijing to stimulate the property market have boosted sentiment. China accounts for around 70% of global iron ore consumption.

 

China is expected to ramp up infrastructure spending to support its economy next year. Several provinces planned to issue over 220 billion yuan in special bonds in the first quarter to fund projects.

 

Supportive measures will continue to be announced to boost the real estate sector as part of efforts to stimulate economic development. Construction of affordable housing and urban village renovation as well as the use of various financial tools would help drive house demand and boost steel consumption.

 

China exported over 82.66 million tonnes of steel products in January-November, up 35.6% on year. Analysts noted the international market continued to recover, encouraging Chinese steelmakers to keep robust production and raw materials buying.

 

Iron ore stockpiles at Chinese ports and steel mills have fallen to multi-year lows, with most mills holding stocks of around 15 days of use, due to weaker shipments from top exporters Australia and Brazil since the third quarter, according to analysts.