Chinese iron ore futures soared more than 4 percent on Thursday, supported by expectations that a move by China’s central bank to reduce the amount of cash lenders keep as reserves would help spur steel demand.

But some traders also say speculative trading activity may be behind the price surge, with supply of the steelmaking raw material staying high.

The most actively traded iron ore for September delivery on the Dalian Commodity Exchange was up 4.3 percent at 465 yuan ($74) a tonne by 0244 GMT, just off a session high of 470 yuan, a 2-1/2-week peak.

China’s central bank unexpectedly said late on Tuesday it will reduce the cash banks hold as reserves by 100 basis points from April 25, helping fuel a rally in prices of steel and its raw materials on Wednesday.

“What our central bank did will give some support to real estate projects, so there should be support for steel demand in the short to medium term,” said a Shanghai-based iron ore trader.

But he said the price increase in iron ore futures, which added to Wednesday’s 2.1-percent spike, may be temporary.

“This could be short-lived because we may also be seeing some speculative money,” he said.

Coke futures on Dalian was up 1.1 percent at 1,853 yuan a tonne, after jumping 4.8 percent on Wednesday while coking coal was steady at 1,147 yuan. Rebar on the Shanghai Futures Exchange rose 0.7 percent to 3,472 yuan per tonne, having climbed nearly 2 percent in the session before.

Stocks of iron ore at China’s main ports stood at 160.1 million tonnes on April 13, not far below a record high of 161.68 million tonnes reached at the end of March, data compiled by SteelHome consultancy showed. SH-TOT-IRONINV

BHP Billiton Ltd , the world’s No. 3 iron ore producer, cut its 2018 fiscal year iron ore output guidance by 2 percent to between 272-274 million tonnes, citing issues in its railroad car unloading system.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 2.1 percent to $65.88 a tonne on Wednesday, the highest since March 22, according to Metal Bulletin.

 

Source: in.reuters.com

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