Iron ore: price rises on Chinese promises to stabilize the economy

The iron ore price rose on Monday due to a promise by the Chinese government to focus on economic stability next year, supporting the demand outlook.

China pledged to continue its prudent monetary policy and proactive fiscal policy, and to prioritize economic stability in 2022.

The supply side of iron ore is not expected to change next year, with shipments remaining stable while production from domestic mines will see a small change. The main factor influencing iron ore prices will be demand, which is more flexible pending housing market policy.

Iron ore futures on the Dalian Commodity Exchange, for May delivery, closed 5% higher at 669 yuan a tonne after rising as much as 5.9% to 674 yuan ($105.93).

Iron ore futures in Singapore rose as much as 7.2% to $116.15 a tonne.

Iron ore has had a tumultuous run this year as a series of production and pollution restrictions have hit consumption and turmoil in the real estate sector has dampened construction activity. The ingredient for steel production has roughly halved from its May peak, although it has recently been bolstered by improving demand.

While weak real estate data has dragged down the ferrous metals market, the outlook for the coming year is not as pessimistic based on the overall goal of “stability” in China.