Iron ore has a curious knack of surging at the end of every month

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Iron ore spot markets rallied hard on Thursday, boosted by the release of a strong China steel industry PMI report for August.

According to Metal Bulletin, the price for benchmark 62% fines jumped by 3.7% to $78.91 a tonne, logging its largest gain since July 31.

The surge in the benchmark was mirrored across the board, especially in higher grades.

Ore with 65% Fe content rose by 2.5% to $101 a tonne, outpacing a smaller 0.4% lift in 58% fines to $49.59 a tonne.

The strong rebound in spot markets followed a similar surge in Chinese commodity futures earlier in the session, corresponding with the release of China’s steel industry Purchasing Managers Index (PMI) for August.

The index jumped to a 16-month high of 57.2, accelerating upon the 54.9 reading of July, led by strong growth in production and new domestic orders during the month.

This PMI measures changes in activity levels across China’s steel industry from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.

So at 57.2, that indicates that perceived activity levels improved at the fastest pace since April 2016 during August.

The strong reading helped to spur buying in Chinese rebar and iron ore futures during Thursday’s day session.

The January 2018 rebar contract on the Shanghai Futures Exchange rose by 1.84% to 3,927 yuan per tonne, while the January 2018 iron ore contract on the Dalian Commodities Exchange surged by 3.9% to 573 yuan per tonne.

That subsequently filtered through to the strong gains seen in spot markets, as has been the case in each of the past three months.

On June 30 the benchmark price jumped by 3.7%, according to Metal Bulletin. On July 31 it surged by 7.2%. And yesterday, again the last day of the month, it soared by 3.7%.

All three gains coincided with the release of the steel industry PMI report, underlining just how much speculative activity exists within these markets at present.

After ripping higher during Thursday’s day session, Chinese commodity futures consolidated on those gains in overnight trade.

Here’s the final scoreboard from Thursday’s night session.

SHFE Rebar ¥3,921 , 1.82%
DCE Iron Ore ¥575.50 , 2.95%
DCE Coking Coal ¥1,445.50 , 2.45%
DCE Coke ¥2,370.00 , 1.37%

Both rebar and iron ore closed around the same levels as Thursday’s day session.

Trade in Chinese commodity futures will resume at 11am AEST, 45 minutes before the release of the Caixin-IHS Markit China manufacturing PMI for August.

This private-sector survey has a tendency to be more market-moving than the official PMI released by the Chinese government.

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