Iron ore is still ripping higher, except the benchmark price which fell

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Iron ore spot markets finished mixed on Monday with a decline in the benchmark price masking strong gains in both higher and lower grade ores.

According to Metal Bulletin, the price for benchmark 62% fines fell by 1% to $64.29 a tonne, snapping a five session winning streak in the process.

Still, the benchmark has risen in 11 of the past 13 sessions, adding a nifty 20.5% in the process.

And, making it the exception to the rule on Monday, both higher and lower grade ores scooted higher during the session.

The price for 58% fines, in particular, had a very strong session, jumping by 3.8% to $44.69 a tonne.

Higher grades also joined in with Brazilian ore with 65% Fe content adding 1.3% to $80.70 a tonne.

The gains across most grades corresponded with a renewed rally in Chinese rebar futures which closed at a three-and-a-half month high, dragging iron ore and coking coal futures higher as a consequence.

To Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, Chinese steel mill margins will play a key role in determining the outlook for iron ore prices.

In his opinion, they’re likely to remain elevated in the period ahead, helping to underpin iron ore demand and prices.

“The recent surge in iron ore prices reflects restocking demand, a shortage of medium and high grade ores and last, but not least, high steel mill margins,” he said in a note released today.

“We continue to see the iron ore rally gaining momentum in the short run as Chinese steel mill margins continue to remain elevated.”

The gains also coincided with the release of the Caixin-IHS Markit China manufacturing PMI for June which revealed activity levels improved unexpectedly last month after declining previously in May.

Providing few clues as to which direction spot iron ore markets will move today, Chinese futures closed off their earlier session highs in overnight trade.

Here’s the closing scoreboard.

SHFE Rebar ¥3,437 , 1.90%
DCE Iron Ore ¥482.50 , 0.84%
DCE Coking Coal ¥1,133.00 , 0.27%
DCE Coke ¥1,772.50 , 0.34%

While they all point to gains, all contracts excluding rebar closed off the highs seen earlier in the session.

Trade in Chinese commodity futures will resume at 11am AEST.

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