The price of iron ore jumped almost 20% on Monday as investors bet that China will stimulate its economy and buoy demand for the key steelmaking ingredient.
Iron ore’s surge came after the Chinese government said over the weekend that it will emphasize growth over economic restructuring this year. The news added to rising optimism about Chinese demand that has helped industrial metals, from copper to tin, bounce back from multiyear lows in recent weeks. Other commodities, including oil, are also on the upswing.
But not everybody is convinced the rallies have legs. Gains in iron ore and some metals may be overly dependent on hopes for Chinese stimulus spending that might not happen, analysts say.
While Chinese demand for iron ore and some industrial metals is robust, that is mostly because the country is taking advantage of cheaper prices to stockpile, some analysts say. Without a material pickup in industrial demand to back up the buying, they add, prices will fall back again unless the hoped-for stimulus arrives.
Source: WSJ