Iron ore spot markets rebounded on Thursday after several days of losses, mirroring a similar move seen in futures earlier in the session.
The spot price for benchmark 62% fines rose by 1.2% to $78.30 a tonne, according to data provided by The Steel Index, marking the first increase seen since December 29 last year.
The gains for lower grade ore were even steeper with the price for 58% fines surging 3.4% to $67.70 a tonne.
The gains in spot markets followed a rebound in Chinese futures following several days of heavy losses.
The move corresponded with news of further reductions in steel output capacity in the Chinese city of Tangshan, the largest producer of steel product in the country.
According to Reuters, citing local government officials, 8.6 million tonnes of steel capacity will be removed in the current year, part of an effort to upgrade its highly-polluting heavy industrial economy.
In 2014 officials from the city pledged to cut 40 million tonnes of crude steel capacity in the five years to 2017, with 31.86 million of that total already achieved as at the end of November last year.
While a supportive factor for steel prices, as some analysts have already pointed out, less steel production inherently means less demand for iron ore.
Still, rebar futures lifted on Thursday, dragging coking coal, coke and iron ore contracts higher with it.
After the strong gains recorded yesterday, the upward momentum in Chinese commodity futures stalled overnight with small gains recorded across the steel-producing complex.
Iron ore futures were up 0.64%, leading gains of 0.14% and 0.23% for rebar and coke futures. Coking coal futures closed the session flat.
Trade in Chinese futures will resume at Midday AEDT.
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