China's economy grew 7.4 percent in the third quarter from a year earlier, matching market expectations. But other data, including industrial production, was slightly ahead of forecasts, and quarter-on-quarter GDP growth was strong, suggesting the worst may be over and the world's No.2 economy will rebound in the final quarter.
"This tells us that the economy's likely to be better in the fourth quarter," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong. "We don't expect any policy response because the government is trying to keep things stable and the effect of earlier policy measures may show up in Q4."
The most traded rebar contract for May delivery on the Shanghai Futures Exchange gained 0.4 percent to 3,673 yuan ($590) per tonne by the midday break. Price offers for imported iron ore cargoes in China rose by $1-$2 per tonne, according to Beijing-based consultancy Umetal, after a flurry of deals on Wednesday was concluded at higher prices.
"There was probably close to 900,000 tonnes sold yesterday via open tenders and the physical platforms," said a Shanghai-based iron ore trader. "I think we might see the situation continue today and tomorrow," he said.
Chinese steel mills usually chase cargoes in bulk and boost stockpiles when prices are rising for fear they could miss the chance to buy material and secure supplies before prices climb further. Benchmark iron ore with 62 percent iron content rose 2.5 percent to $115.40 a tonne on Wednesday, snapping a four-day decline, based on data from Steel Index.
Rising steel output in China, the world's biggest producer and consumer should support iron ore prices between $110 and $130 between now and the end of the year, said Liu of Mirae Asset, particularly if its economic recovery stays on track.
China's average daily crude steel output rose to 1.932 million tonnes in September from 1.894 million tonnes in August, as a rebound in prices encouraged mills to boost production. For all of September, crude steel production stood at 57.95 million tonnes, down 1 percent from August, to mark the lowest output since February, data from the National Bureau of Statistics showed.
"Chinese mills haven't really seriously cut production this year, which means Chinese demand for iron ore will be maintained," said Liu. "I think steel mills will continue to increase output in October, maybe to between 1.95 million and 2 million tonnes per day. There's still demand out there, but not exciting, so we won't see the run-rate exceeding this year's high."