Iron ore enters a bull market

JAIME REINA / AFP / Getty Images
  • The benchmark iron ore prices has entered a bull market, climbing 20.4% from July 5.
  • While the benchmark price surged on Thursday, modest losses were recorded in higher and lower grades. Despite the mixed performance, all grades remain at or within touching distance of fresh multi-month or multi-year highs.
  • Chinese steel and bulk commodity futures rose in overnight trade, hinting that spot markets are likely to start on a stronger footing on Friday.

Iron ore entered a technical bull market on Thursday as the benchmark price continued to surge.

According to Metal Bulletin, the price for 62% fines jumped 1.8% to $76.04 a tonne, extending its gain from July 5 to 20.4%, above the 20% threshold defined as a bull market.

It now sits at the highest level since early March this year, and has rallied neatly 10% since the end of Golden Week holidays in early October.

As has been seen on occasions before, the current price trajectory is near-parabolic.

Despite a strong gain in the benchmark, that move was not reflected in lower and higher grades which weakened during the session.

After surging into a bull market of its own a day earlier, the price for 58% fines dipped 1.2% to $44.74 a tonne. Higher grades were also a tad softer with the price of 65% fines slipping 0.2% to $98 a tonne.

Both remain within touching distance of fresh cyclical highs.

“Prices lifted as steel prices gained on impending cuts to steel output in China as policymakers look to reduce pollution during the winter season,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth bank.

“A number of Chinese cities and provinces outlined their explicit plans to either cut industrial output or conduct environmental inspections in coming months.”

The mixed performance on spot markets was mirrored by Chinese steel and bulk commodity futures on Thursday.

The January 2019 rebar contract in Shanghai finished the session at 4,192 yuan, up marginally from Wednesday’s night session close of 4,186. It briefly rose to 4,209 yuan, the highest level in over a month.

Hot-rolled coil futures were also bid, ending trade at 3,948 yuan, up 1.36% from the prior day session close.

According to Reuters, the value of fixed-asset investment projects approved in China during the third quarter more than quadrupled from the prior three months, indicating the government is rolling out measures to support economic activity.

The state planner approved 45 projects worth 437.4 billion yuan in July-September, accounting for nearly two-thirds of the value of approvals so far this year, Reuters said.

The strength in steel prices was reflected in coking coal and coke contracts traded separately in Dalian which finished the session at 1,415 yuan and 2,456.5 yuan respectively, well above the close on Wednesday evening of 1,390.5 yuan and 2,349.5 yuan.

Prices have been supported this week due to a combination of temporary supply disruptions and speculation over environmental restrictions on coal and coke output.

In contrast to the gains across the broader bulk commodity complex, iron ore futures in Dalian slipped a tad, ending trade at 533 yuan. That was marginally below the 534.5 yuan level it finished in overnight trade.

Hinting that spot markets are likely to be supported in early trade, all steel and futures contracts edged higher on Thursday evening.

SHFE Rebar ¥4,217 , 0.89%
DCE Iron Ore ¥534.00 , 0.38%
DCE Coking Coal ¥1,421.50 , 1.97%
DCE Coke ¥2,462.50 , 1.17%

The gains were once again led by steel contracts, a factor that has often acted to support bulk commodity prices in the past.

Trade in Chinese commodity futures will resume at midday AEDT.

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