(Bloomberg) -- Iron ore rallied strongly for a second day on speculation that China’s mammoth stimulus package would help to bolster demand.
The steelmaking material briefly rose above $99 a ton in Singapore before paring gains, after closing almost 6% higher in the previous session. Beijing unveiled a broad suite of measures on Tuesday to support Asia’s largest economy, with a particular focus on steps to revive the real estate market.
The rebound has raised the possibility that prices may have the momentum to push back into three figures. However, iron ore is still down by more than a fifth since late May on China’s slowdown, a crisis rippling across the nation’s vast steel industry, and robust supplies from producers in Brazil and Australia. Huatai Futures Co. was among those striking a wary note.
“Driven by the macro stimulus, ferrous products are having strong run in the short term, but the spot market is still cautious,” it said in a note. “If demand for steel products doesn’t improve notably, the supply and demand for iron ore will not reach a balance. The downside risk still exists.”
Iron ore rose 3.6% to $98.10 a ton in Singapore as of 11:52 a.m. local time after being up almost 5%. In China, yuan-priced futures were up more than 3% in Dalian, while steel contracts advanced in Shanghai.
Most base metals were also higher following a 2.5% jump on Tuesday, the biggest advance for the catch-all LMEX Index since late July. Copper rose 0.5% to $9,846 a ton on the London Metal Exchange after being up as much 1.2%. Aluminum climbed to the highest level since June, and zinc rose for a third day to extend gains above $3,000 a ton.
--With assistance from Jessica Zhou and Martin Ritchie.
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