Iron-ore prices jumped 4% late Monday and overnight, the biggest one-day gain since March, after data showed that China’s imports of the commodity jumped last month, and Chinese steelmakers began buying in earnest after a weeklong national holiday.
Market participants are debating whether prices have bottomed or the move reflects a short-lived recovery in a continued downturn. Demand for iron ore, a key ingredient in steel, also provides clues to the strength of China’s slowing economy.
Other commodities, including copper, also gained on a report Monday of broadly stronger Chinese imports, although iron-ore’s rally was the most pronounced. China recorded a 14% rise in iron-ore imports last month from a year earlier, and a nearly 17% gain over the first nine months of the year, official data showed. China’s exports of steel products rose to a record.
“The knife has finally stuck in the spot iron-ore price floor,” said Charlie Aitken, Sydney-based Executive Director at Bell Potter Securities. He said confidence was rising and traders were buying on hopes that supply was no longer “dramatically outstripping demand.”
Recent statements by top Chinese officials that the world’s No. 2 economy will meet its growth target of around 7.5% this year have also bolstered sentiment, Commonwealth Bank of Australia analyst Lachlan Shaw said.
The spot price of iron ore rose to US$83.10 a metric ton, according to The Steel Index. The price rise is a welcome reversal for iron-ore bulls and miners. Just two weeks ago the price had hit its lowest level since 2009, after falling more than 42% since the beginning of the year.
While the price slide has been underpinned by record production from Australian mines, analysts have been closely watching for signs of strengthening Chinese demand, which is essential to mopping up higher output, which is also expected from countries such as Brazil.
“I think you’ve seen the bottom for the year in spot iron ore,” said Mr. Aitken, who said he wouldn’t be surprised to see prices edge back up to US$95 a ton.
But others aren’t so convinced.
“Further supportive Chinese data will be needed to sustain the overnight rally in iron ore, as yesterday’s support from import figures is unlikely to linger,” analysts at Australia and New Zealand Banking Group Ltd. wrote in a note.
Many economists also remain skeptical about China’s broader economy. Economists had forecast a drop of 2.4% in China’s total imports in September. Imports rose 7% after falling the two months prior.
Economists question whether that Monday’s data points improved economic growth momentum or simply a better exports outlook as Chinese companies ship more products like steel abroad.