(Bloomberg) -- Iron ore spiked almost 11% and base metals rose after three of China’s biggest cities eased curbs on home-buying, bolstering the outlook for demand in Asia’s largest economy as the central government adds stimulus.
Shanghai, Guangzhou and Shenzhen loosened rules, following through on Beijing’s latest efforts to prop up the embattled property sector. Futures surged in Singapore to hit the highest since July, while copper and zinc rose on the London Metal Exchange as traders gathered for a major industry meeting.
Iron ore — which had been one of the year’s worst performing major commodities as China’s economy slowed — has been revived as Beijing moved more aggressively to shore up the economy. Central to that effort have been initiatives to drag the real estate market out of a years-long slump that’s damaged activity and confidence.
“China’s stimulus measures are much stronger than anticipated, plus there’s expectations for more fiscal measures,” said Steven Yu, a researcher at Mysteel. “The ferrous market is in the middle of traditional peak season, and rebar has seen fast destocking,” he said, referring to reinforcing bar, one of the most common steel products.
Guangzhou became the first tier-one city to remove all restrictions on homebuyers. Shanghai, China’s financial hub, and Shenzhen, the southern city known for its tech industry, announced they were lowering minimum downpayment ratios for first and second homes to 15% and 20%, respectively. China’s central bank also announced on Sunday that it would allow refinancing of mortgages.
Iron ore traded 9.7% higher at $112 a ton at 12:50 p.m. in Singapore after surging as much as 10.6% earlier, the biggest intraday spike since September 2021. That jump followed an 11% rally last week.
The slowdown in China’s property market has been a major challenge for steelmakers given that it’s traditionally been a mainstay of demand. Leading mills have been slashing production, and have warned that industry conditions are worse than major traumas in 2008 and 2015.
On the supply side, iron ore production is likely to remain abundant. Miners in Brazil and Australia — home to the world’s four largest exporters — have been raising output.
Base metals extended last week’s gains on the London Metal Exchange, with copper rallying to as much as $10,158 a ton, the highest since June. Traders, producers and investors are set to gather in London for LME Week, a big industry event.
“China’s recent stimulus U-turn has clearly been supportive,” Citigroup Inc. analysts including Wenyu Yao wrote in a note. “Bullish momentum could persist into LME Week.”
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