Iron ore is on a roll.
Spot prices jumped again on Thursday and Dalian futures continued to soar overnight. It’s looking unstoppable for the moment.
According to Metal Bulletin, the spot price for benchmark 62% fines increased by 1.4% to $76.93 a tonne, taking its gain over the past three sessions to 9.4%.
It’s now put on a giddying 76.6% so far in 2016.
And it doesn’t look like the rally is going to end anytime soon, at least according to Chinese futures markets.
The January 2017 contract on the Dalian Commodities Exchange increased by a further 2.16% overnight, closing the session at 638.5 yuan.
From the lows struck on Monday this week, it’s now surged by an enormous 19.8%.
That’s nearly the technical definition of a bull market — an increase of 20% — in just four days of trade.
There were also gains recorded in coking coal, coke and rebar prices, suggesting the moves in both spot and futures markets were driven by improvement sentiment towards the outlook for steel prices.
Trade in Chinese commodity futures will resume at Midday AEDT.
“It was more of the same today as steel mills continue to chase high grade fines, as well as material with low silica, while buoyant global commodities markets fuelled the on-shore futures,” said analysts at the Steel Index.
Others, such as commodity researcher Daniel Hynes from ANZ, suggest that the likelihood of increased cyclone activity in Northwestern Australia over the southern hemisphere summer may also be a contributing factor.
“Forecasts for an above-average number of cyclones in Western Australia could hit iron ore exports,” he said in a report released on Thursday, adding that “over the past 12 years, Australia’s iron ore exports have dropped an average of 5.4 percent in January-March from the previous quarter”.
“With the spectre of increased disruptions and a subsequently tighter market, steel mills are likely to continue restocking in the short term,” he said.
Australia’s Bureau of Meteorology said in early October that Northwest Australia can expect the tropical cyclone season to be more active than last season, citing climate modelling.