Iron ore is sucking in buyers left, right and centre

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The rally in iron ore is showing few signs of easing up, being sucked higher by a renewed burst of speculative buying.

Led by another surge in Dalian iron ore futures, the spot price for benchmark 62% fines jumped by a further 1.35% to $61.56 a tonne, according to Metal Bulletin.

It has now gained 3.5% from Thursday last week. That extends to 21.6% from June 24. Year to date it has now gained over 41%.

It’s been that kind of year — a good one after years of relentless downward pressure.

Like the movements in Chinese coking coal and rebar futures, the surge on Monday was driven by hopes that government-enforced output curtailments across the nation’s steel and coal sectors will lead to higher prices.

While these announcements were made months ago, it appears that this, yet again, is driving the bullish price action in Chinese bulk commodity futures.

Very little attention is being paid to the slowdown in Chinese demand — the reason that production curtailments were implemented in the first place — nor the difficulty that higher prices will have when trying to convince previously uneconomic producers to shutter production.

No, it’s all bullish at present, with strong upward momentum sucking in buyers left, right and centre, particularly in Chinese futures.

Overnight the most actively traded September 2016 contract on the Dalian Commodities Exchange rose by a further 2.41%, closing the session at 509 yuan. It was the highest closing level since March 2015.

After closing “limit up” 7% on Monday, coking coal futures continued to screech higher, rising by a further 5.42% to 1,255 yuan. It was the highest closing level since February 2014.

Not to be outdone, rebar futures on the Shanghai Futures Exchange also gained, closing the session with a gain of 1.48%.

Trade in all three contracts will resume at 11am AEST.

On current form, it looks likely that there’ll be another gain in iron ore spot markets should the rally in Chinese iron ore futures be sustained.

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