Iron ore has been on a rare winning streak of late, adding close to 10% over the past three sessions of trade.
According to Metal Bulletin, the spot price for 62% fines rose by a further 2.8%, or $1.43, to $52.54 a tonne, leaving the price at the highest level seen since May 20.
Since Thursday it has added 9.05%, extending this years gain to 20.6%.
According to Metal Bulletin, the gains were once again propelled by strength in Chinese steel prices caused by temporary supply disruptions in Tangshan, a major steel producing centre.
“China’s spot rebar prices moved up on Tuesday June 7 after the steelmaking hub of Tangshan city issued a yellow alert for smog. The alert – the third most severe – warns of smog from Wednesday June 8 onwards, and requires steel mills and coking plants to reduce emissions by at least 30%,” said analysts at Metal Bulletin.
“The warning comes ahead of the Local Leaders’ meeting of China and Central and Eastern European countries on June 16-20 and coincides with the ongoing International Horticultural Expo in the city.”
For the uninitiated, it is not unusual for Chinese authorities to orders temporary slowdowns in heavy industry around important political events, willing to sacrifice output for vanity.
While iron ore is on a winning streak as a consequence, there are signs that the recent burst in buying may be coming to an end.
In overnight trade the most actively traded September 2016 iron ore futures contract on the Dalian Commodities Exchange fell by 1.09%, closing the session at 364.5 yuan.
There were also steep declines of 1.45% and 0.73% recorded in rebar and coking coal futures, mirroring decline in other industrial metals.
Trade in Chinese commodity futures will resume at 11am AEST. Given the relationship between the two of late, continued weakness in futures will likely herald a pull back in the spot price should the losses be maintained or built upon today.
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