Iron ore spot prices continued to rip higher on Friday, rising to fresh multi-year highs following the release of bullish Chinese trade figures for January.
And there could be even further substantial gains to come if Chinese iron ore futures are anything to go by.
According to Metal Bulletin, the spot price for benchmark 62% fines soared by 3.32% to $86.62 a tonne, the fourth consecutive gain in a row.
It has now gained 10% this year after soaring more than 80% in 2016, extending its rise from the lows struck in mid-December 2015 to 126%.
As a result, it now stands at the highest levels since September 2, 2014.
Spot prices for both higher and lower grade ores also boomed, particularly the latter which jumped by 5.25% for the session.
Analysts at Metal Bulletin said the bounce corresponded with another surge in Chinese futures following the release of Chinese trade data for January earlier in the session.
“China’s iron ore imports continued to soar in the first month of 2017, rising 12% year-on-year amid stronger prices,” it said. “This increase came despite a week-long Chinese New Year holiday from January 27.”
China imported a total of 92 million tonnes of iron ore in January, up 3.4% from December. It was the second largest monthly total on record.
“Steel mills moved quickly in early January to import more ore before the New Year holiday and that pushed the number up for the month,” Daniel Meng, an analyst at CLSA Materials & Transportation Research, told Reuters. “While the holiday meant less imports near the end of the month, net-net the impact was positive.”
Meng told Reuters that the high import figure also reflected a build-up of inventories at Chinese ports, which could slow future shipments into China.
Chinese iron ore port inventories rose to the highest levels on record last week, according to data released by Shanghai Steelhome.
While the January import figure was an undeniably bullish outcome for prices, it was perhaps not all that surprising given iron ore exports to China from Australia’s Port Hedland hit the highest levels on record in December.
In January, exports from the world’s largest iron ore loading terminal fell sharply — partially as a result of weather disruptions — suggesting Chinese import volumes for February may slow noticeably should the relationship between the two be maintained.
Regardless of what may lie ahead, Chinese futures traders loved the strong January result, pushing the May 2017 iron ore future on the Dalian Commodities Exchange up a mind-boggling 7% for the session.
At one point it was trading at more than the three-year high.
And, even after the that enormous gain, traders continued to hoover futures up on Friday evening.
The May 2017 iron ore future closed the session at 695.5 yuan, up 4.19%. It currently sits at the highest level since July 2014.
It was a familiar story for rebar, coke and coking coal futures which all closed up by more than 1.94% over the same period.
Trade in Chinese commodity futures will resume at midday AEDT.