Chinese iron ore futures are rallying hard on Monday, suggesting the rout in the spot price may be nearing an end.
Midway through the session, the most actively traded May 2016 contract on the Dalian Commodities Exchange is up 2.28% at 292 yuan. The January 2016 contract, carrying less open interest but whose movements are more in line with those seen in the spot price, are also on a tear, rallying 2.87% to 304.5 yuan.
Should the gain be sustained this afternoon, it suggests there may be a sharp rise in the spot price when it is released at 10pm AEDT this evening.
If true, it will come as welcome news to iron ore producers, investors and the Australian government.
On Friday the spot price for benchmark 62% fines fell by a further 22 cents, or 0.57%, to $38.30 a tonne according to Metal Bulletin’s iron ore index. It was the lowest spot price on record dating back to mid-2009, and left the year to date decline at 46.25%.
The falling price has reaped havoc on the share price of iron ore miners, and will potentially strip billions out of revenues in Australia’s 2015/16 federal budget.