Chinese iron ore and coal futures are in the middle of another bonkers rally

Photo: Niall Carson/ PA Wire via Getty Images.

Chinese bulk commodity and rebar futures have surged out of the gate on Thursday, continuing the rally from earlier in the week.

And coking coal is having a whale of a session, currently sitting limit up 8%.

That’s right. The only thing preventing further gains at this stage is that market rules don’t permit it.

Here’s the scoreboard as at 12.05pm AEST.

SHFE Rebar ¥3,318 , 1.84%
DCE Iron Ore ¥481.00 , 5.37%
DCE Coking Coal ¥1,134.50 , 8.00%
DCE Coke ¥1,772.50 , 5.51%

The rally in coking coal and coke future may be explained by the tweet below.

As he points out, other commodities have also followed suit, particularly iron ore which has added 5.48% to sit at 481.5 yuan per tonne, leaving it at the highest level since mid-May.

Disruptions to coal supply, potentially pushing up prices as a consequence, would normally benefit higher iron ore grades which are more efficient in steel production.

Others such as Robert Rennie, Westpac’s global head of macro strategy, suggest the move in iron ore may be merely catch-up to the strength in Chinese steel prices earlier this month.

Whatever is driving the move, be it those or more speculative factors, the latest buying spurt suggests spot iron ore markets will add to the 10% gain achieved in the previous two sessions.

The price for benchmark 62% fines surged 4.4% to $62.33 a tonne on Wednesday, according to Metal Bulletin, leaving it sitting at the highest level since May 22.

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