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CHART: The overnight surge in iron ore nearly doubled the previous record gain

Fortescue chairman Andrew Forrest. Paul Kane/Getty Images

The iron ore price is certainly the talk of Australian markets this morning.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped by $9.99, or 18.6%, to $63.74 a tonne.

No matter how you calculate it – percentage or dollar terms – it was the largest one-day increase on record since daily spot pricing was first introduced in May 2009.

The chart below tells the story. Monday’s increase nearly doubled the previous record of 9.9% recorded on July 9 last year, a gain that immediately followed the largest one-day percentage decline on record in the previous session.

There have been many theories published as to why the surge occurred, the most plausible explanation seen so far is Chinese steel mills have brought forward production before an enforced curtailment of production in the Chinese city of Tangshan, a major steel producing city in the northern province of Hebei.

The city is scheduled to host an international horticultural exposition between April 29 through to October 16 this year, with authorities keen to ensure bright blue skies greet those who will be in attendance.

A similar scenario occurred in 2015 when authorities ordered steel mills in provinces around Beijing to either cease or limit production to ensure clear skies for an important Military parade to mark the end of World War 2 held on September 3.

Then, as is suspected now, Chinese mills brought forward production before the enforced curtailment, leading to a temporary spike in steel production and, as a consequence, the iron ore price.

In the months following the parade, the spot iron ore price was hammered, falling to as low as $38.30 a tonne, the lowest level on record.

The question now is whether the same scenario is playing out now.

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