Iron ore price surpasses $ 100 again after Evergrande deal

The price of iron ore jumped on Wednesday after China Evergrande Group, the largest residential real estate operator, said it reached an agreement with yuan-denominated bondholders to pay interest.

In January, iron ore on the Dalian Mercantile Exchange of China closed its day trading 3.7% higher at 668.50 yuan ($ 103.41) a tonne.

The deal brought some relief from concerns about Evergrande's financial stability.

The repayment of the domestic bond is estimated at $ 35.9 million. However, the world's largest real estate developer is also due to pay off $ 83.5 million in foreign bond interest on Thursday.

China's central bank has also boosted short-term cash in the financial system, helping stable commodity markets.

Analysts warn that China's steel sector continues to face lingering challenges.

Iron ore fell 60% from a record $ 230 /t in May. Restrictions on steel production, along with ownership restrictions and concerns about power shortages, have reduced demand for iron ore in China.

“Due to the constant implementation of energy limiters, the maintenance work at the factories is expanding and, in particular, the production of construction steel has dropped significantly,” said an analyst at Haitong Futures Co. Qiu Yihong.

China's Yunnan steel province last week asked local factories to adjust production schedules, while ensuring a cut in steel production in 2021. Jiangsu, a province with a large economy like Canada's, has also cut electricity supplies to companies, including mills.

As a consequence, iron ore will come under more pressure, falling to $ 80-90 a tonne next year, said Wayne Gordon, strategist at UBS Group AG.