- Iron ore spot markets surged to fresh multi-month highs on Monday, helped by improved confidence about the demand outlook in China.
- Chinese iron ore port inventories fell last week as steel mill demand improved.
- Chinese iron ore and rebar futures rose in overnight trade, pointing to early strength in spot markets today.
Iron ore spot markets surged to fresh multi-month highs on Monday, helped by improved confidence about the demand outlook in China.
According to Metal Bulletin, the price for benchmark 62% fines jumped 2.3% to $68.93 a tonne, extending its rally over the past three sessions to 3.7%.
It now sits at the highest level since March 16, a two-month high.
Both lower and higher grades rallied on Monday, albeit by a lesser margin.
58% fines added 1.6%, settling at $40.70 a tonne. 65% fines was the relative underachiever, rising only 1.3% to $87.20 a tonne.
Further signs of strengthening demand may have contributed to the broad-based rally.
According to Reuters, citing data from Mysteel consultancy, the utilisation rate at blast furnaces across China rose to 69.89% last week, its highest level since early November last year.
Iron ore inventories at 45 major ports in China also fell, dropping nearly 1% last week to 158.76 million tonnes.
“The fast pace of reopening at steel mills and falling inventories at ports indicate strong restocking demand,” an analyst at Orient Futures said in a note.
The strength in spot markets was replicated in futures trade on Monday.
In Dalian, the September 2018 iron ore contract closed at 488 yuan, just off the two-month high of 490 yuan level struck earlier in the session.
Coke and coking coal contracts also rallied, closing at 2,084 yuan and 1,260.5 yuan respectively.
Rebar futures traded separately in Shanghai rose by a smaller margin, finishing the day session at 3,667 yuan.
However, as seen in the scoreboard below, both iron ore and rebar futures continued to rally in overnight trade.
SHFE Rebar ¥3,701 , 0.79%
DCE Iron Ore ¥491.00 , 1.45%
“The increase in operations at steel mills in China following the winter-induced production curbs has seen demand pick up strongly in recent weeks,” said analysts at ANZ Bank. “Combined with the better-than-expected economic data, this has boosted sentiment in the steel sector.”
The strength in futures suggests spot markets will follow suit today, at least in early trade.
All Chinese commodity contracts will resume trade at 11am AEST, one hour before the release of Chinese economic data on industrial output and fixed asset investment in May.
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