China’s $256b dam project in Tibet opens iron ore price floodgates

Iron ore and steel climbed to a four-month high, as China’s plan for a mega dam in Tibet bolstered the outlook for demand.

The steel-making ingredient jumped as much as 2.9 per cent in Singapore to approach $US104 a tonne on Monday, following a run of four weekly gains, while futures for reinforcement bar in Shanghai also surged to the highest level since March. On the London Metal Exchange, copper advanced.

Premier Li Qiang launched construction of the 1.2 trillion yuan ($256.5 billion) hydropower project on the Yarlung Tsangpo river on Saturday. The initiative — which will consist of five cascade dams — promises to deliver a positive economic jolt for construction materials including metals, cement and glass.

Iron ore is on course for the first monthly gain since January, as Beijing has continued a push to curb excess competition and overcapacity in the steel industry, fuelling expectations it could have positive impact on mill margins and lift raw-materials prices. The new dam project stands to benefit steelmakers, which have been grappling with a prolonged property crisis.

The China Iron and Steel Association said on Friday it held a meeting with major steelmakers and the steel department chief at the industry ministry, at which participants vowed to step up efforts to curb so-called involution, a state of hyper-competition that hurts returns.

China will also study setting up a new system to rein in overcapacity, the group said, without giving details.

Iron ore surged 2.8 per cent to $US103.60/t at 10.45am in Singapore, while rebar and hot-rolled coil in Shanghai climbed more than 2 per cent. On the LME, copper was up 0.5 per cent to $US9830/t while zinc and aluminium also gained.

Annie Lee