Chinese iron ore futures are going parabolic -- and spot markets may be next

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Iron ore spot markets finished Friday trading mixed with weakness in the benchmark price offset by strength in lower grade ores.

But Chinese futures ripper higher yet again on Friday evening, not only suggesting that the rally will likely resume with gusto on Monday, but also that a fresh multi-year high may be seen should the strength in futures markets be sustained today.

According to Metal Bulletin, the spot price for benchmark 62% fines fell by 0.56% to $80.54 a tonne on Friday, snapping a four session winning streak in the process.

The decline left the price 3.63% below the multi-year high of $83.58 a tonne struck on December 12 last year.

Despite the weakness in the benchmark price, lower grade ores strengthened with Metal Bulletin reporting that the spot price for 58% fines rose by 0.54% to $59.16 a tonne.

Analysts at the group linked the decline in the benchmark price back to weakness in Chinese steel markets.

“China‚Äôs spot rebar prices fell again on Friday January 13 after a short-lived rebound a day earlier, as the futures and billet markets declined ahead of the weekend,” it said.

“Weakening futures led to bearish sentiment in the spot market, compounding the thin trading environment often seen on a Friday.”

However, while futures weakened during Friday’s day session, that wasn’t the case on Friday evening. They ripped higher, led by iron ore.

The most actively traded May 2017 contract on the Dalian Commodities Exchange jumped by 4.93% to 639 yuan, leaving it sitting at the highest level seen since December 14 last year.

That gain was mirrored by coking coal and coke futures which also added 4.33% and 3.93% respectively.

Despite the strength in the costs for its raw inputs, rebar futures traded desperately on the Shanghai Futures Exchange added just 0.97%, a comparatively weak performance in comparison.

The gains followed the release of Chinese trade data for December earlier in the session, revealing demand for raw materials remained incredibly strong late last year.

Trade in Chinese commodity futures will resume at Midday AEDT, with Metal Bulletin due to release its daily iron ore index after 9.30pm AEDT this evening.

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