Iron ore futures are surging again

ARUN SANKAR / AFP / Getty Images

Chinese commodity futures surged out of the blocks yet again on Monday, adding to the gains achieved on Friday evening.

And it’s yet again being led by iron ore futures in Dalian.

Here’s the scoreboard just over a hour into Monday’s trading session.

SHFE Copper ¥51,080 , 0.33%
SHFE Aluminium ¥16,660 , 0.85%
SHFE Zinc ¥26,475 , 1.96%
SHFE Nickel ¥89,170 , 2.88%
SHFE Rebar ¥3,977 , 4.03%
DCE Iron Ore ¥594.50 , 6.35%
DCE Coking Coal ¥1,491.00 , 1.64%
DCE Coke ¥2,305.00 , 2.51%

Some big gains, especially for iron ore.

The January 2018 contract in Dalian has surged by over 6%, leaving it at the highest level since March 20. It’s now jumped by close to 15% in just the past three trading sessions, extending its rally from mid-June to over 46%.

Dalian Iron Ore January 2018 Contract. Source: Thomson Reuters

Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, says the latest buying spree has been powered by speculation that strong Chinese steel mill margins will lead to an increase in output, underpinning demand for iron ore.

“Iron ore prices are rising on demand hopes as higher steel prices encourage Chinese steel mills to boost production,” he says, noting that end-user demand “remains resilient”.

“We expect Chinese steel demand to be well supported over the next few months as policymakers shore up economic growth ahead of a leadership transition in the final quarter of the year.”

Chinese rebar futures on the Shanghai Futures Exchange have also surged by over 40%, taking the January 2018 contract back towards the multi-year highs struck earlier this month.

Coking coal and coke futures are also pushing higher, underlining burgeoning investor confidence on the outlook for steel production in the period ahead.

The continued strength in futures points to the likelihood that iron ore sport markets will rally further on Monday.

According to Metal Bulletin, the price for benchmark 62% fines jumped by 3.35% to $77.94 a tonne on Friday, leaving it at the highest level since April 6.

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