Iron ore's losing streak came to a spectacular end after BHP deliberately derailed a runaway train

PETER PARKS / AFP / Getty Images
  • Iron ore’s three-day losing streak came to a spectacular end on Monday with strong gains recorded across all of the major grades.
  • A train derailment on BHP’s privately-owned line resulted in the miner suspending all iron ore rail operations in Western Australia on Monday.
  • A rebound in Chinese steel futures may have also helped to fuel gains.

Iron ore’s three-day losing streak came to a spectacular end on Monday with strong gains recorded across all of the major grades.

According to Metal Bulletin, the spot price for benchmark 62% fines surged 2.4% to 75.74 a tonne, its largest gain since October 17.

58% fines jumped 1.1% to $45.42 a tonne while 65% Brazilian fines rose by a smaller 0.6% to $97.10 a tonne.

The move coincided with news that BHP had suspended all iron ore rail operations in Western Australia following a train derailment on its privately-owned Mount Newman line, sparking concern of potential supply disruptions.

“A Western Australia iron ore train has been derailed near Turner River on route to Port Hedland this morning,” BHP said in a statement. “No one has been injured. We are working with the appropriate authorities to investigate the situation.”

The train was carrying 268 wagons of iron ore and was deliberately derailed as it took off without a driver on board.

According to calculations from Reuters, the train was traveling at around 180km/h when it derailed, resulting in “substantial” damage, according to the Australian Transport Safety Bureau.

“The company has not announced how long the operations will be impacted, but it does have a substantial stockpile at the port that it will be able to utilise,” analysts at ANZ Bank said in a note.

The gains in spot markets were also helped by a rebound in Chinese steel futures during the session.

Rebar futures in Shanghai finished trade at 4,072 yuan, rebounding after falling to 4,002 yuan earlier in the session, the lowest level in three weeks. It closed at 4,060 yuan on Friday evening.

Hot-rolled coil futures also bounced, finishing at 3,773 yuan having fallen to 3,717 yuan in early trade. That too was marginally above the 3,762 yuan level it finished last week.

The strength in steel prices flowed through to iron ore, coking coal and coke contracts traded separately in Dalian.

Iron ore rose to 515.5 yuan, up from Friday’s night session close of 508.5 yuan. Coking coal also inched higher, finishing trade at 1,384 yuan, up from 1,371 yuan on Friday evening.

Coke contracts outperformed the broader move with the January 2019 contract surging to 2,406 yuan, up from the prior close of 2,368 yuan.

As seen in the scoreboard below, the gains in bulk commodity futures continued overnight despite flat-low lower outcomes in steel contracts.

SHFE Hot Rolled Coil ¥3,772 0.61%
SHFE Rebar ¥4,060 , 0.57%
DCE Iron Ore ¥516.50 , 1.18%
DCE Coking Coal ¥1,393.00 , 1.72%
DCE Coke ¥2,429.00 , 2.19%

The continued lift in bulk commodity futures suggests spot markets may start off on a stronger footing today.

Trade in Chinese commodity futures will resume at midday AEDT.

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