Iron ore futures are skyrocketing again

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  • It’s quiet across Asian markets on Wednesday. The one exception is Chinese iron ore futures.
  • The September 2019 contract on the Dalian Commodities Exchange has soared to fresh record highs at the mid-session break.
  • Both futures and spot markets have surged since late last year, driven by supply disruptions and strong steel production in China.

It’s an uncharacteristically quiet day across Asian markets on Wednesday, especially compared to recent times.

Stocks aren’t doing much and neither are currency markets. Bonds are also sleepy.

But one market is moving: Chinese iron ore futures.

They’re in the midst of another breakneck rally, adding to substantial gains seen in recent months.

The September 2019 contract on the Dalian Commodities Exchange has soared to 729.5 yuan at the mid-session break, leaving it at fresh record highs.

Thomson ReutersDalian Iron Ore Sept 2019 futures contract.

It’s now rallied 66% since late November last year, including a mammoth 31% since the start of April, fueled by supply disruptions in Brazil and soaring steel production in China, both the largest consumer of iron ore and largest producer of steel globally.

The hefty gains in Dalian, if sustained in the second half of Wednesday’s session, point to further strength in physical markets which have also soared in recent months.

On Tuesday, the spot price for benchmark 62% fines rose 0.6% to $102.30 a tonne, according to Metal Bulletin, leaving it at levels not seen since May 2014. It too has rallied around 60% since late November last year.

Based on the price action in futures so far on Wednesday, there could well be even further gains to come.

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