Iron ore prices continue to surge

Gregory Boissy/ AFP/ Getty Images
  • Iron ore spot markets continue to rally, closing at fresh cyclical highs on Friday.
  • The gains coincided with continued strength in Chinese steel prices.
  • Chinese rebar, coking coal and coke futures all weakened on Friday evening. Iron ore managed to buck the trend, closing at the highest level since early March.

Iron ore spot markets continue to rally, closing at fresh cyclical highs on Friday.

According to Metal Bulletin, the price for benchmark 62% fines rose 0.6% to $76.48 a tonne, settling at the highest level since early March this year.

Both lower and higher grade ore also pushed higher during the session.

The price of 58% fines jumped 1.3% to $54.31 a tonne. The price of 65% Brazilian fines rose by a smaller 0.4% to settle at $98.40 a tonne.

All three grades have now climbed more than 20% from their year-to-date lows, leaving them in a technical bull market.

The across-the-board gains in spot markets mirrored similar moves in Chinese steel futures during the session.

Rebar futures in Shanghai finished Friday’s day session at 4,228 yuan, adding to gains achieved earlier in the week. That was marginally higher than Thursday’s night session close of 4,217 yuan, leaving it at the loftiest level in six weeks.

According to data from Mysteel Consultancy, steel inventories held by Chinese traders fell 490,700 tonnes to 9.8 million tonnes last week, predominantly reflecting a sharp 8.2% decline in rebar stocks.

That was despite steel mill utilisation rates holding firm despite a raft of temporary production cuts introduced due to adverse weather conditions.

Mysteel said utilisation rates at blast furnaces at Chinese steel mills stood at 68.23% last week, down marginally from 68.37% a week earlier.

The small decline coincided with temporary production cuts in China’s Hebei province, renowned for both its heavy industry and poor air quality at certain points of the year.

With Chinese steel futures continuing to surge, it helped propel iron ore and coking coal contracts higher on the Dalian Commodities Exchange.

Thew January 2019 iron ore contract ended trade at 538.5 yuan, up from 534 yuan on Thursday evening.

Coking coal futures were also supported, climbing to 1,433 yuan, up from the prior night session close of 1,421.5 yuan.

Along with strong demand, coking coal prices have been supported by a series of temporary mine closures in China’s Shandong province following an accident at a coal mine late last week that killed eight workers.

According to Reuters, 41 coal mines in the province have been ordered to halt production for security checks.

Coke contracts, after surging earlier in the week, bucked the broader trend on Friday, finishing trade at 2,437 yuan, down from Thursday’s night session close of 2,462.5 yuan.

As seen in the scoreboard below, all contracts bar iron ore futures finished lower during Friday’s night session.

SHFE Rebar ¥4,188 , -0.73%
DCE Iron Ore ¥540.50 , 1.12%
DCE Coking Coal ¥1,392.50 , -1.76%
DCE Coke ¥2,401.00 , -2.08%

while iron ore futures continued to climb, the weakness in steel prices suggests there’s a risk iron ore spot markets may also soften in early deals on Monday.

Trade in Chinese commodity futures will resume at midday AEDT.

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