Iron ore jumps back above $40

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The spot iron ore price has moved back above $40 a tonne.

According to Metal Bulletin, the spot price for benchmark 62% fines rose by 67 cents, or 1.70%, to $40.10 a tonne.

It was the fourth gain in five trading sessions and left the price 4.7% above its record-low of $38.30 a tonne set on December 11.

Pointing to the likelihood of another substantial increase this evening, Chinese iron ore futures soared on Friday evening.

According to the Dalian Commodities Exchange, the most actively traded May 2016 contract rose by a further 2.69% to 305.5 yuan. The January 2016 contract, now the front month and more akin to movements in the spot price, did even better, finishing the session limit up at 3.99%.

If maintained during Monday’s trading session, beginning at 12pm AEDT, it suggests that the spot price is likely to push higher this evening.

The substantial pop in both spot and futures pricing came despite a warning from the China Iron and Steel Association (CISA) about the potential for further weakness in iron ore prices.

“The China Iron & Steel Association (CISA) warned today that steel mill’s cash-flow woes could spill over to the iron ore market. Increasing financial pressure on Chinese steel makers towards the year-end may pose a threat to the seaborne iron ore market, the industry body said in its monthly iron ore report,” noted analysts at Metal Bulletin.

“Prior to the recent uptick in sentiment, the mood in the iron ore market had deteriorated following talk of mills slowing or halting their steelmaking operations. Iron ore prices fell while stockpiles of the steelmaking raw material at Chinese ports grew as a result. CISA attributed the sustained iron ore price decline to oversupply along the entire steel value chain.”

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