Iron ore prices ripped higher on Tuesday, with Chinese futures suggesting further significant gains to come.
The spot price for benchmark 62% fines jumped by 2.15% to $58.08 a tonne, according to Metal Bulletin, leaving the gain so far this week at close to 4%.
The hefty gains extended the price surge seen so far in 2016 to 33.3%.
Analysts at Metal Bulletin note that the spot market was “fairly active” with “upward momentum being seen in prices”.
Perhaps contributing the bullish price action seen this week, the group notes that the government has stepped up its efforts to shut down outdated and inefficient steel producers.
“An inspection team from the Ministry of Environmental Protection has been stationed in east China’s Jiangsu province to make random visits to enterprises including steel mills to check on their emissions,” said Metal Bulletin, citing local media reports.
“The move is seen as a more assertive approach than expected, with several companies in north Jiangsu already given verbal warnings over their emissions.
“Those found to be operating without the necessary paperwork have been shut down as part of the government drive to remove outdated capacity,” it added.
Whether it contributed to the spot price surge on Tuesday or not, Dalian iron ore futures continue to rocket higher in overnight trade, closing the session at the highest level seen since July 13.
The most actively traded September 2016 iron ore contract finished up 4.65% to 461.5 yuan, more than doubling the gain seen during Tuesday’s day session.
If sustained today, it points to the likelihood of another hefty increase in the spot price arriving later in the session.
Trade in Chinese commodity futures will resume at 11am AEST.