The price of iron ore surged on Friday amid news China’s strict COVID-19 elimination strategy could soon be relaxed.
That could make way for a surge of infrastructure growth in the nation, which would likely, in turn, increase demand for iron ore.
Of course, that would be good news for producers of the metal such as ASX shares BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Ltd (ASX: FMG).
Let’s take a closer look at the news that boosted the commodity’s price today.
What drove the iron ore price higher today?
China is getting ready to reopen, with plans to scrap parts of its COVID-zero policy in select areas over summer (June to August), according to reporting by the Wall Street Journal.
Following the initial relaxing, a widespread reduction in China’s suppression strategy could begin in spring, sources told the publication.
The country is then expected to return to a more normal reality next year.
China is the world’s biggest importer of iron ore. Thus, an end to its COVID-19 strategy could see it demanding more of the steel-making material.
The iron ore price hit its highest point in six months – US$161.20 per tonne – on Friday, according to the Australian Financial Review (AFR).
Early last month, The Motley Fool Australia reported on the outlook for iron ore producers according to Randal Jenneke, head of Australian equities at T. Rowe Price.
Janneke believes, after the Chinese market fell in 2021, recovery-fuelled growth in China will drive the iron ore price this year.
And such growth was seemingly made evident recently. China’s Purchasing Managers’ Index (PMI) rose to 50.2 in February.
The PMI outlines the health of the nation’s manufacturing sector. Any result above 50 reflects growth in the sector, while results below 50 indicate contractions.
Finally, there could be more good news for the iron ore price next week.
All eyes will be on China over the weekend as the nation’s ‘Two Sessions’ meetings begin.
The meetings will see China’s key economic targets for the year ahead revealed, as well as other important matters, reports Reuters.
The post Why is the iron ore price hitting 6-month highs? appeared first on The Motley Fool Australia.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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