Iron ore finds support as Chinese steel production hits another record high

Photo by Kevin Frayer/Getty Images

Iron ore spot markets closed mixed on Monday with the benchmark price sliding higher and lower grades rose.

According to Metal Bulletin, the spot price for benchmark 62% fines fell by 0.95% to $60.80 a tonne, extending its decline this year to 22.9%.

It currently sits just above the eight-month low of $60.15 a tonne struck last week.

However, while the benchmark price went into reverse, both higher and lower grade ores moved in the other direction, particularly the latter.

The spot price for 58% fines jumped by a massive 4.5% during the session, closing at $41.09 a tonne.

As a result of the divergent performance between the two, Metal Bulletin said that the spread between 62% and 58% fines narrowed to the lowest level seen since December last year.

The gains across most iron ore grades followed news that China produced the most crude steel on record in April, surpassing the previous record high set just one month earlier.

According to data released by China’s National Bureau of Statistics, a mammoth 72.78 million tonnes of steel was produced last month, topping the 72 million tonne level set in March.

However, instead of creating concern that it could lead to excess steel supply, undermining prices as a consequence as has been the case in recent weeks, it appears that on this occasion it has been taken as a bullish signal for demand for its raw ingredients, including iron ore.

Continuing the bullish price action seen on Monday, the most actively traded September 2017 iron ore futures contract on the Dalian Commodities Exchange added an additional 1.32% overnight, closing the session at 460 yuan per tonne.

Coking coal and rebar futures also closed in the black, rising 0.54% and 0.49% respectively.

Trade in Chinese commodity futures will resume at 11am AEST.

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