Iron ore prices have soared to nine-month highs, fuelled by expectations that new stimulus measures from Beijing will revitalise China's struggling real estate market.
According to Bloomberg, Chinese regulators are preparing a list of 50 eligible real estate developers for financing, including prominent firms like China Vanke and Longfor Group.
Iron ore futures rose significantly after China's plan to support its debt-burdened property sector was announced.
On Wednesday afternoon, Singapore iron ore futures rose by 0.2%, reaching US$133.50 per tonne (A$203) on the December contract — a level not seen since February when prices hit US$130 a tonne.
The ASX materials sector responded positively, with leading mining companies like BHP (ASX:BHP) and Rio Tinto (ASX:RIO) gaining. The BHP share price hit an eight-month high, rising 0.9% to $47.84, while Rio Tinto saw a 0.3% rise, closing at $127.76. Fortescue (ASX:FMG), despite a slight decline, traded close to its record high at $25.81 on Tuesday.
This upward trend in commodity prices is largely attributed to the market's growing confidence in China's recent stimulus efforts aimed at bolstering its property sector, a key consumer of steel.
However, not all are convinced of the long-term impact of China's stimulus plan.
Commonwealth Bank commodities strategist Vivek Dhar expressed scepticism regarding the effectiveness of China's 'white list' approach in reviving the property sector.
He referred to previous instances where similar measures did not prevent major developers like Country Garden from defaulting.
Dhar anticipates continued pressure on China's property sector and expects iron ore prices to stabilise between US$100 and US$110 per tonne, contrary to more optimistic forecasts.