The spot iron ore price continued to surge on Tuesday, and it looks like there’s more significant gains to come today.
According to Metal Bulletin, the spot price for benchmark 62% fines jumped by a further 4.1%, or $2.49, to $62.85 a tonne, leaving the price less than one dollar below the multi-month high of $63.74 a tonne struck on March 7.
No matter how you express it, the scale of the rally seen in the past five months has been epic.
Over the past two sessions, the price has jumped 7.8%. Year to date that extends to 44.3%. From December 11 last year — the day that the spot price fell to the lowest level on record — it has jumped 64.1%.
Big numbers, and ones that looks set to get even larger today if Chinese futures are anything to go by.
Iron ore futures on the Dalian Commodities Exchange soared by 5.36%, outpaced by a 5.72% gain in rebar futures on the Shanghai Futures Exchange.
Both contracts can only rally a maximum of 6% from the previous day’s closing level, underlining just how bullish the price action was overnight.
Should both maintain or build upon the gains seen overnight, it suggests the spot iron ore price will likely surge to the highest level seen since early June 2015 when the daily spot price fixing is announced by Metal Bulletin at 8.30pm AEST.
Vivek Dhar, a mining and energy commodities analyst at the CBA, put the strength in both iron ore and rebar futures down to another price surge in physical steel markets.
“Spot Chinese steel rebar prices are now at levels not seen since late 2014, helped in part by a recovery in China’s property sector,” says Dhar.
However, despite the bullish price action seen in recent week’s, he warns excessive iron ore port inventories has the potential to cap gains in the iron ore price moving forward.
“High port inventories — around 99 million tonnes or around 8% of Chinese demand — will likely cap any further surges in iron ore prices. Near term restocking demand is also expected to be subdued with several steel mills reporting sufficient iron ore stockpiles.”
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.