Citi has reaffirmed its optimistic outlook for iron ore prices, projecting a rise to US$150 per tonne over the next three months, as China's central bank unveiled plans to reduce bank reserve requirements next month.
This move is expected to inject about US$140 billion ($212.4 billion) of liquidity into the financial system.
Reports have also emerged indicating that Beijing is contemplating measures to stabilize the nation's struggling stock market.
These actions have spurred a rally across the base metal markets, propelling copper prices to a three-week high exceeding US$8500 per tonne, while iron ore futures in Singapore reached US$136 per tonne.
Further policy easing in China
Citi analyst, Wenyu Yao, views these measures positively, expecting the risk rally to persist, bolstered by forthcoming details on urban village redevelopment and robust total social financing figures. The brokerage maintains its iron ore price forecast of US$150 per tonne, highlighting the potential for further policy easing in China as an "upside catalyst."
Furthermore, Citi anticipates improved fundamentals for the commodity post-Chinese New Year in mid-February. As policy momentum gains momentum, especially ahead of the National People's Congress in March, the second quarter could witness increased upside catalysts, both in terms of macro expectations and fundamental strength.
Citi has consequently raised its three-month copper price forecast to US$8800 per tonne, citing the potential for further policy easing and tighter supply. Meanwhile, Goldman Sachs is even more bullish, reiterating a 12-month target of US$10,000 per tonne for copper, emphasizing the positive impact of policy adjustments on market stability and investor confidence amid domestic macro challenges.