Shares of metal companies rallied on September 30, driven by a sharp increase in iron ore prices and China’s efforts to revitalize its struggling property sector. Leading the gains were NMDC, MOIL, Hindalco, and JSW Steel, all surging between 2-4%.
The rally followed a near 11% spike in iron ore prices after China’s decision to ease home-buying restrictions in three of its largest cities—Shanghai, Guangzhou, and Shenzhen. This policy shift is expected to improve the demand outlook for iron ore, aligning with Beijing’s broader efforts to support the country’s beleaguered property sector.
China is the world’s largest consumer of iron ore, a critical steel-making ingredient, and the easing of property restrictions has sparked optimism about increased construction activity.
Iron Ore at highest levels
Iron ore futures on the Singapore Exchange surged to their highest levels since July, while copper and zinc prices also rose on the London Metal Exchange, signaling broader market optimism for metals.
Positive Impact on Metal Stocks
The improved demand outlook from China, the world’s largest importer of metals, has lifted metal stocks globally.
Along with NMDC and Hindalco, other metal stocks such as SAIL, Tata Steel, and Welspun Corp also gained, pushing the Nifty Metal index up by over 1% during the session.
China’s Economic Challenges and Response
China has been grappling with a prolonged property sector debt crisis, rising youth unemployment, and weakening domestic demand. In response, the People’s Bank of China (PBOC) introduced several initiatives last week to spur economic growth.
These measures include lowering the reserve requirement ratio, reducing the policy interest rate, and driving down the market benchmark interest rate.
Additionally, the central bank plans to reduce interest rates on existing mortgages and standardize down payment ratios, further stimulating demand in the property sector, which has historically contributed over a quarter of China’s GDP.
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