Iron ore just suddenly spiked

Atsushi Tomura/Getty Images for FIVB

Iron ore used to be a sleepy commodity market. Those days are but a memory.

It’s now wild, as demonstrated by the daily gyrations that have now become norm rather than the exception.

Tuesday was no exception. Out of nowhere, and after two days of heavy losses, prices exploded higher led by another enormous move in Chinese futures.

The spot price for benchmark 62% fines surged by 3.34% to $83.29 a tonne, according to Metal Bulletin, completely reversing the decline reported in the previous two sessions.

Prices for both lower and higher grade ores also surged, particularly the former.

According to Metal Bulletin, the move was sparked by strength in steel billet prices, leading to some enormous gains in futures markets after several days of heavy losses.

“As billet prices rebounded, futures too made a comeback, recording sharp gains during the day,” it said.

Rebar futures, having fallen nearly 9% in the previous two sessions, added over 2% while iron ore futures, after slumping close to 10% since the resumption of trade following Lunar New Year celebrations, jumped by over 3%.

However, suggesting that speculation rather than fundamentals drove the surge in futures, the group said that optimism surround billet prices did not extend to all spot markets.

“Amid high inventory levels in the spot market and soft demand from the construction centre, the rebound failed to push up rebar prices,” it said.

However, the gain in futures clearly spilled over into spot iron ore markets, continuing the resilient price action seen in recent months that’s coincided with Chinese port inventories surging to the highest levels on record, according to data from Shanghai Steelhome.

Suggesting that the positive momentum in spot markets may continue on Wednesday, Chinese futures continued to push higher overnight.

Iron ore added 1.95%, closing at 626.5 yuan, while rebar closed up 0.45% at 3,143 yuan.

Trade in Chinese commodity futures will resume at Midday AEDT.

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