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Iron ore reaches multi-month high in hopes of a steel supply cut and Chinese stimulus

Thursday, iron ore futures prices rose for the third consecutive session, reaching multi-month highs. This was due to a resurgence of optimism about a new reform wave to curb steel production and additional stimulus measures by China, its largest consumer.

As of 0318 GMT on China's Dalian Commodity Exchange, the most traded September iron ore contract was trading 1.97% higher, at 751 Yuan ($104.64), a metric tonne, which is the highest price since April 3.

As of 0308 GMT the benchmark August iron ore traded on the Singapore Exchange rose 1.96%, to $97.95 per ton. This is the highest price since May 26.

The main reason for the rise in prices is the anticipation of supply-side steel reforms, according to a Shanghai analyst who spoke on condition of anonymity because he was not authorized to speak to media.

On Wednesday, the head of China's state planner announced that the country's economy would exceed 140 trillion yuan in this year. Meanwhile, the second largest economy in the world has been battling a long-running trade war with the United States as well as persistent deflationary forces.

Analysts at Yongan Futures said that this fueled some hopes about "whether there will be more stimulus in the high level meeting later this month."

Pei Hao is an analyst with Freight Investor Services, a brokerage in international. She says that iron ore has benefited from the recent rally on the coal markets, which was fueled by the expectation of reforms at the supply side.

Pei said that there was no fundamental shift in iron ore supply and demand. Although shipments fell, a decrease in arrivals is likely to be visible until late July.

Coking coal and coke, which are both steelmaking ingredients, also saw gains.

The benchmarks for steel on the Shanghai Futures Exchange have strengthened. Hot-rolled coil, rebar, wire rod, and stainless steel all gained.

(source: Reuters)