The 62% iron ore price rose by 0.26% to US$102.44 per tonne while Chinese iron ore futures lifted to their highest level in more than a month, up 1.51% to US$110.84, in overnight trading.
This has lifted ASX iron ore shares, with most of the major producers outperforming the S&P/ASX 200 Index (ASX: XJO) in early Tuesday trading.
The ASX 200 is up 0.59% at the time of writing.
Fortescue Ltd (ASX: FMG) shares are up 2.21% to $19.46.
The Rio Tinto Ltd (ASX: RIO) share price is up 0.62% to $120.02.
The BHP Group Ltd (ASX: BHP) share price is up 0.07% to $40.75.
Champion Iron Ltd (ASX: CIA) shares are 2% higher at $5.875.
The Mineral Resources Ltd (ASX: MIN) share price is up 4.56% to $37.35.
What's happening with commodity values this week?
Analysts at Trading Economics said iron ore prices were higher due to strong steel production in China.
New data shows China's steel output increased by 9.5% over the past three weeks compared to the same period last year. This has been driven by export demand rather than domestic demand.
Steel production in China rose to 81.9 million tonnes in October, and exports surged to their second-highest level on record at 11.2 million tonnes.
Data also showed a 4.3% annual fall in industrial profits in October, up from a 3.5% drop in September.
The analysts commented:
Investor sentiment remained positive, with hopes that Beijing will introduce additional stimulus measures to support economic growth and mitigate the potential impact of US President-elect Trump's proposed tariffs.
Markets are now looking ahead to two key events in China where extra stimulus may be announced.
There is a Politburo meeting early this month and the Central Economic Work Conference in the middle of the month.
The analysts said:
Among the support measures are reports that policymakers will set the 2025 fiscal deficit at higher-than-expected levels, increasing liquidity for debt-ridden property developers, among the largest consumers of steel rebar in the world.
Outlook for iron ore prices in 2025
China is the world's largest iron ore importer, so the outlook for the commodity's prices largely hinges on its economic conditions.
According to the Australian Financial Review (AFR), BMI has reiterated its $US100 per tonne forecast for annual average iron ore prices in 2025.
In a note, BMI said it was "expecting continued downward pressure due to weak demand stemming from a subdued outlook for mainland China amid its sluggish property sector".
The 62% iron ore price hit a multi-year low of $US85 per tonne on 23 September. There was a short-term rally after China announced stimulus to prop up its ailing economy.
BMI said persistently weak domestic demand for steel and rising iron ore inventories were keeping downward pressure on iron ore prices.
BMI said:
We expect iron ore prices to continue to be hit by a weak demand outlook, barring additional support measures from mainland China in the coming months.
Vivek Dhar, a commodity strategist at Commonwealth Bank of Australia (ASX: CBA), said China's stated economic growth target of 5% for CY24 would require growth of 5.4% in the final quarter of the year.
Annual growth was tracking at 4.6% at the end of the third quarter.
Dhar expects additional stimulus measures to support China's economy in 2025.
He expects some announcements to this effect at the 'Two Sessions' meeting in March. This is where annual economic targets are set.
Dhar said:
Policymakers will also have more clarity by March on President Trump's tariffs on China and any assistance required by the Chinese economy.
