Iron ore prices have finished 2018 and started 2019 with strong momentum, following the steep correction registered in November. Since the beginning of December the Kallanish KORE 62% Fe index recovered almost $10/tonne, returning firmly above $73/t cfr Qingdao during the first days of the new year.

The positive momentum continued as mills looked to restock ahead of the Chinese New Year. The country, meanwhile, cut its required reserve ratio to boost credit liquidity, giving a further support to the overall sentiment of the economy and the iron ore market. The peak season for steel after the Chinese New Year will be key to profitability again this year and mills’ are in need to restock ore ahead of higher production in the coming months.

Sentiment has also been bolstered by an announced -1% cut in China’s banking reserve requirement ratio. The People’s Bank of China (PBoC) said this would be done in two stages, on 15 and 25 January.The move amounts to a CNY 800 billion ($116.7 billion) injection of liquidity into credit markets, PBoC said.

Although the move is expected to ease tight credit around the Chinese New Year holidays, analysts note it may not be enough to boost bank lending to small companies. This type of lending is key to supporting economic growth through the year.

On Friday 4 January the Kallanish Kore index reached $73.90/t cfr Qingdao, the highest level since the end of November. Historically, Chinese iron ore prices recover during the first part of the year as mils prepare their stocks for the first half of the year. Last year at the beginning of January prices were verging towards $80/t, in a rally that would have taken levels to above $90/t by the end of February.