DALIAN iron ore futures surged nearly 6 percent and Shanghai steel climbed to its highest in almost nine months yesterday, before cutting gains at the close, as a recovery in China’s housing prices boosted hopes for demand for the two commodities.

    That should spell more gains for spot iron ore, which has risen more than 30 percent to be this year’s top performing commodity.

    Data Friday showed home prices in China climbed at their fastest pace in almost two years in February, with prices in smaller cities also marking their first increase since 2014.

    “This will boost sentiment among property developers, they will have more confidence in the property market so they will build more. That will support demand for steel and iron ore,” said Helen Lau, analyst at Argonaut Securities in Hong Kong.

    “The worry is the supply response to the rally, which will eventually cap price rises,” said Lau.

    The most-traded iron ore for September delivery on the Dalian Commodity Exchange surged as much as 5.9 percent to hit its exchange-set ceiling of 431 yuan (US$67) a ton, before curbing gains at the close to 422.50 yuan, up 3.8 percent.

    The gains spilled over to iron ore futures on the Singapore Exchange, with the May contract rising 2.29 percent to US$54.55 a ton.

    On the Shanghai Futures Exchange, rebar, a construction steel product, closed up 1.3 percent at 2,147 yuan a ton, after rising as far as 2,210 yuan, its strongest since June 29.

    While the sharp, double-digit increases in Chinese home prices last month were courtesy of the big cities such as top performers Shenzhen, Shanghai and Beijing, Commonwealth Bank of Australia said prices in tier 3 cities and below rose 0.1 percent, marking the first increase since April 2014. (SD-Agencies)