Iron ore prices continued to rally on Friday, coming within a whisker of closing above the $80 a tonne level for the first time in 26 months.
And it looks like it may get there on Monday, at least based off a continued rally in futures markets.
According to Metal Bulletin, the spot price for benchmark 62% fines jumped by a further 3.5% to $79.61 a tonne on Friday, extending its four-day rally to an amazing 13.2%.
There were similar gains recorded for both lower and higher grade ores on Friday.
The benchmark price has now added 82.7% so far in 2016, and has risen 108% from the all time low of $38.30 a tonne struck on December 11 last year.
“It was more of the same today as steel mills continue to chase high grade fines, as well as material with low silica, while buoyant global commodities markets fuelled the on-shore futures,” said analysts at The Steel Index.
The rally also corresponded with the news that Chinese policymakers had managed to remove 88 million tonne of steelmaking capacity across the country in the nine months to September, close to double its initial target of 45 million tonnes for the year.
“Large-size Chinese steelmakers had phased out 40.75 million tonnes of production capacity up to September and reductions by smaller companies brought the total to 88 million tonnes,” said Reuters, citing remarks from Chinese Vice Premier Liu Yandong on Thursday.
Earlier this year, Chinese policymakers pledged to reduce annual steel making output by around 100 to 150 million tonnes before 2020.
Based off the figures presented, they have been more than successful in their attempts so far in 2016, clearing well over half of this figure in just nine months.
That news helped to spur on gains in steel prices, along with its raw ingredients, including iron ore.
And there’s no sign that the rally in Chinese commodity futures is slowing down with some enormous increases recorded on Friday evening, indicating that the benchmark iron ore spot price may move back above the $80 a tonne level for the first time since October 2014 on Monday.
The May 2017 iron ore future on the Dalian Commodities Exchange — now the most actively traded contract — rose by a further 2.68% to 612 yuan on Friday.
There were also similar gains recorded for coking coal, coke and rebar which rose by between 2.55% to 3.65% over the same period.
Trade in Chinese futures will resume at Midday AEDT.
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