Iron ore has enjoyed a stunning rally this week

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The iron ore price continued to surge higher on Thursday, taking gains for the week so far to nearly 10%.

According to Metal Bulletin, the spot price for benchmark 62% fines rose by a further 2.0%, or 89 cents, to $45.52 a tonne.

The increase left the benchmark price up 9.1% this week, and some 18.85% from its all time record low of $38.30 a tonne struck on December 11 last year.

Analysts from Metal Bulletin report that optimism towards the outlook for demand after the Lunar New Year holiday contributed to the surge.

“It has been reported that Traders at Chinese ports raised their offers by 5-10 yuan per wet tonne today on optimism for the post-holiday market, with mills working to increase their efficiency even as expectations remained for an expected drop in supply,” Metal Bulletin wrote in a research note overnight.

“Higher futures also lifted sentiment. A few enquiries from mill buyers were heard during the day for late-February/early-March cargoes of higher grade iron ore.”

While iron ore futures rallied hard on Thursday, finishing trade near limit up, or 4%, they softened in overnight trade, suggesting that the spot price rally may stall heading into the week-long Lunar New Year break.

The most actively traded May 2016 contract on the Dalian Commodities Exchange closed down 0.3% at 335.5 yuan, mirroring a similar decline in rebar futures.

Both contracts will resume trade at 12pm AEDT.

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