The spot iron ore price ripped higher overnight, mirroring moves seen in Chinese futures during Monday’s session.
According to Metal Bulletin, the spot price for benchmark 62% fines rose by 3.12%, or $1.30, to $43.02 a tonne.
The increase, the largest in percentage terms since January 18, left the benchmark price at a fresh four-week high.
While it likely played a small role in the huge surge seen on Monday, the gain corresponded with a sharp improvement in China’s steel industry PMI gauge in January.
“China Federation of Logistics & Purchasing have released figures showing Chinaâ€™s steel PMI rose to a nine-month high in January”, wrote analysts at Metal Bulletin in a research note released overnight.
“The index stood at 46.7 points last month, up from 40.6 points in December last year. The sub-indices for product inventory fell further to a 29-month low of 34.4 points, while that for new orders rose to a 18-month high of 49.9 points.”
Essentially this means that activity levels, while continuing to contract, haven’t deteriorated this slowly in the past nine months.
The fall in inventories, along with the uplift in orders to just under the 50 level that separates declining volumes from growth, may partially explain the rebound in rebar and iron ore prices over the course of January.
“The latest PMI figures show that China’s steel market continues to improve, but the slowdown in the country’s economic growth and weaker demand could weigh on steel prices, the CFLP said following the release of the January report.
Offering no real clue as to whether the gain in the spot price will likely continue today, Chinese iron ore and rebar futures closed mixed in overnight trade.
Both will resume at 12pm AEDT with the daily spot price fixing from Metal Bulletin arriving later in the day at 9.30pm AEDT.