Iron ore price rises on pre-holiday restocking, China stimulus hopes
"Winter restocking of iron ore among steel mills is still underway, so we believe ore prices will find some support in the near term," analyst says.
Spot copper was trading up just under 13c at $3.65 a pound in late dealings in New York on Friday – a 3.66% improvement on the day and a new 4-month high.
Copper’s bounce builds on a 9% improvement in the price during August and comes after the Chinese government approved a raft of new building and rail projects this week in a concerted effort to boost its slowing economy – like iron ore used in steelmaking, copper’s fortunes have been increasingly tied to Chinese investment in infrastructure.
The China Securities Journal reports that China’s National Development and Reform Commission (NDRC), one of the country’s top decision-making bodies, approved 25 urban rail projects just on Wednesday and the total amount of stimulus spending announced this week could reach the 1 trillion yuan ($157 billion) mark.
Copper – which is still trading down 11% compared to this time last year – was also boosted by currency movements as talk of further quantitative easing in the US weakens its currency.
Not everyone is convinced the rally is sustainable however. Reuters quotes Duncan Hobbs, an analyst from Australian investment bank Macquarie:
“Prices are rising in anticipation of a potential policy response to a weak situation. There is nothing fundamentally to warrant the rise in prices, absolutely nothing. If stimulus doesn’t come or doesn’t work, then these markets are rising on air.”
