(Bloomberg) — Iron ore reversed direction after dropping to its lowest level in 10 months as optimism that the country’s economic recovery may be starting to gain traction countered weakness in the steel market.
Futures in Singapore climbed 2% to above $102 a ton after slumping almost 4% in early trading to below $100. Government data published on Sunday showed manufacturing PMI in March snapped a five-month contraction to rise to the highest in a year. Both official and private survey numbers from Caixin beat market expectations.
Still, the property sector — a major driver of steel demand — remains mired in a years-long crisis that shows few signs of resolution. That’s been reflected in iron ore prices, which have slumped more than 25% this year.
Disappointment over demand has coincided with a period of relatively abundant supply. Australia, the top shipper, saw a surge in iron ore exports in the week ending March 15 — the most recent for which data is available. Stockpiles held at China’s ports are the largest in more than a year at about 142 million tons.
The drop in iron ore prices this year has ramifications well beyond China by hurting the most important revenue stream for global miners like BHP Group Ltd., Rio Tinto Group and Vale SA. Australia gets around a third of its total resource and energy export revenues from selling the material.
Iron ore in Singapore traded at $102 a ton by 5:53 p.m., up 1.9%. Dalian iron ore futures closed 3.8% higher after a sharp rebound in the afternoon session. Futures for steel rebar — basic metal rods used in construction — also swung to a gain after earlier slumping to the lowest level in almost four years.
The China Iron & Steel Association last week warned that the property downturn and relatively weak infrastructure were delaying a recovery in steel demand. The steel industry’s purchasing managers index for March sank to 44.2 — its lowest reading since May last year.
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