Iron ore has snapped its losing streak in spectacular fashion

PETER PARKS / AFP / Getty Images

Iron ore spot markets sprung back to life on Monday, ripping higher following another ridiculously large rally in Chinese steel futures.

And with the latter jumping again in overnight trade, the strength in spot markets may well extend into a second session on Tuesday.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped by 1.78% to $88.26 a tonne. It was the first increase since March 7, and the largest in percentage terms since February 27.

That move followed a more than 5% rally in Chinese rebar futures earlier in the session, a factor that underpinned iron ore futures as a consequence.

Both contracts recorded massive swings of more than 7% from the lows struck during Friday’s overnight session.

Simply enormous.

“China’s ferrous futures made big gains during the day, rising particularly rapidly in the afternoon,” said Metal Bulletin, noting that “the seaborne iron ore market saw plenty of offers after futures and steel prices recorded strong gains”.

As for the factors that drove the increase, take your pick.

Some put the strength down to seasonal demand as construction activity picks up heading into spring while others suggested that it was reaffirmation of steel production output cuts from policymakers over the weekend that led to the surge in buying activity.

Neither appear to be “new” news, and given the scale of the gains in futures over the past 24 hours, it’s highly likely that speculative forces have been major factor behind the amazing turnaround.

Whatever the reason for the surge, the bullish price action continued unabated overnight.

The May 2017 iron ore future last traded at 690.5 yuan, up 4.86% from the previous closing level. It had touched a more than one-month low of 638.5 yuan in the previous night session.

Rebar futures traded separately on the Shanghai Futures Exchange also rallied, finishing trade up 3.9% at 3,596 yuan.

SHFE Copper ¥47,300 , 0.60%
SHFE Aluminium ¥13,830 , -0.18%
SHFE Zinc ¥22,495 , 1.08%
SHFE Nickel ¥84,800 , 1.58%
SHFE Rebar ¥3,596 , 3.90%
DCE Iron Ore ¥690.50 , 4.86%
DCE Coking Coal ¥1,307.00 , 1.08%
DCE Coke ¥1,839.50 , 1.94%

Trade in Chinese futures will resume at midday AEDT, an hour before the release of Chinese industrial production and urban fixed-asset investment figures for January and February.

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