Iron ore gains on infrastructure boost and stimulus optimism

Iron ore futures surged, supported by the announcement of a major hydropower project and growing optimism over potential government stimulus measures.

On Saturday, Chinese Premier Li Qiang announced the launch of a large-scale hydropower development in the lower reaches of the Yarlung Zangbo River, according to an official government statement. The project will include five cascade hydropower stations with an estimated total investment of around USD 168 bln. The massive infrastructure push is expected to drive steel demand, particularly for long products, further lifting market sentiment.

Adding to the upbeat mood are expectations that new stimulus policies may be introduced at a key government meeting in July.

Market confidence is also supported by healthy steel margins, especially among blast furnace-based producers, which are likely to sustain high production levels and, in turn, support iron ore consumption. Moreover, Beijing’s efforts to curb aggressive price competition are seen as another positive signal for the iron ore market.

However, downside risks remain. Chinese authorities may intensify efforts to reduce excess steelmaking capacity, while increasing trade protectionism against Chinese steel exports and concerns over surging billet inventories, highlighted by the China Iron and Steel Association (CISA), could dampen momentum in the second half of 2025.

On the Dalian Commodity Exchange, the most-traded September iron ore contract rose 2.08pct to 809 yuan (USD 112.7) per ton. Coking coal and coke futures also rallied sharply, climbing 5.05pct and 7.88pct to settle at 1,603 yuan (USD 223) and 1,006 yuan (USD 140) per ton, respectively.

Steel futures gained on the Shanghai Futures Exchange. Rebar and HRC rose over 2pct to 3,224 yuan (USD 449) and 3,394 yuan (USD 473) per ton, respectively. Wire rod increased 2.48pct to 3,516 yuan (USD 490), while stainless steel advanced 1.33pct to 12,905 yuan (USD 1,798) per ton.

1 USD / 7.17 yuan