Chinese commodity futures are exploding higher after days of heavy losses

PETER PARKS / AFP / Getty Images

There’s rarely a dull moment in Chinese commodity futures, and today is no exception.

After days of heavy losses, rebar, iron ore, coke and coking coal futures have jumped out of the blocks upon the resumption of trade on Tuesday, extending the modest gains seen overnight.

And, as the early scoreboard shows, when we say extending, we really mean ballistic with gains in excess of 4%.

SHFE Rebar ¥3,303 , 4.06%
DCE Iron Ore ¥648.50 , 6.14%
DCE Coking Coal ¥1,227.00 , 4.60%
DCE Coke ¥1,669.50 , 5.00%

There’s been no announcement, nor data release, to explain the sharp and sudden reversal, although, in what have become increasingly momentum-driven markets, one suspects that the stabilisation in futures on Monday may have been seen as the catalyst to “buy the dip” among some investors.

From the highs struck last week, the most actively traded rebar, iron ore and coking coal futures had lost 7.6%, 9% and 13.2% respectively at the lows of Monday’s session.

The rebound may also being assisted by reduced trading volumes ahead of Chinese New Year celebrations, according to analysts at Metal Bulletin.

“With more and more participants leaving the market ahead of the week-long Chinese New Year holiday, which begins on Friday, both the spot and futures markets saw limited trading,” the group wrote on Monday.

Seemingly, traders are not waiting for the fireworks to bring in New Year, they’re already creating them in the futures market.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.