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Chinese iron ore futures are going bananas, surging over 7%

Photo by Scott Campbell/Redferns via Getty Images

It’s been quite a ride for Chinese iron ore futures traders this week.

After selling ore like it was covered in spiders earlier in the week, sentiment towards the red stuff has done a complete about-face, moving from pessimism to euphoria seemingly in the blink of an eye.

Take a look at the scoreboard with a little under 90 minutes of trade on Friday to explain the shift in sentiment.

SHFE Zinc ¥21,675 , 3.73%
SHFE Nickel ¥79,950 , 1.22%
SHFE Rebar ¥2,996 , 3.52%
DCE Iron Ore ¥512.50 , 7.44%
DCE Coking Coal ¥1,148.50, 6.00%
DCE Coke ¥1,656.00, 6.29%

Huge.

After jumping more than 4% in overnight trade, the most actively trade September 2017 iron ore future on the Dalian Commodities Exchange has gone parabolic today, rising more than 7%.

That strength has mirrored a similar move in rebar futures on the Shanghai Futures Exchange which have put on a nifty 3.5%.

Earlier this week they were the kind of losses that were being reported.

While any number of fundamental factors have been used to explain the roller coaster ride in futures, it’s likely that speculative forces have been behind much of the moves, both up and down.

Indeed, the surge in Chinese steel and bulk commodity futures today followed news that the United States has launched a probe into steel imports on competition and security grounds, an announcement that would usually be seen to be a negative for not only Chinese steel output as the world’s largest producer, but also for the raw materials required to make it.

But not today.

Given the huge momentum swings in both directions, it suggests that the speculators have been in control this week, and physical markets have merely come along for the ride.

Dalian Iron Ore Hourly Chart. Source: Thomson Reuters

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