BEIJING: Iron ore futures prices rebounded on Thursday as news of authorities in top consumer China considering government purchases of unsold homes lifted investor sentiment and demand outlook for the key steelmaking ingredient.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) ended daytime trade 2.56% higher at 881 yuan ($122.09) a metric ton.

The benchmark June iron ore on the Singapore Exchange was up 2.46% at $116.5 a ton, as of 0730 GMT. China is considering a plan for local governments nationwide to buy millions of unsold homes, Bloomberg News reported on Wednesday, citing sources.

Linan district in the eastern city of Hangzhou issued a notice on Tuesday that the local government will purchase new apartments from private developers for public rental housing.

“We believe this year’s peak demand will last from second half of April to the end of May, supporting ore prices,” said Pei Hao, a Shanghai-based analyst at international brokerage Freight Investor Services (FIS). “Lending support is also a weaker US dollar. But the thin steel margins may prevent prices from rising significantly.”

The quicker-than-expected destocking of steel products this week bolstered sentiment as well, analysts said. Total inventories of the five major steel products fell by nearly 4% from last week to a four-month low of 18.13 million tons as of May 16, data from consultancy Mysteel showed.