- Iron ore spot markets continued to rally on Thursday, led once again by mid and lower grades which hit the highest level in over seven months.
- The uptrend in Chinese futures has stalled in recent sessions, hinting that spot markets may soon follow suit.
- China will release Q3 GDP data later today. For commodity markets, there’s likely to be more interest on industrial output and urban fixed asset investment figures for September. All the data will hit at 1pm AEDT.
Iron ore spot markets continued to rally on Thursday, adding to strong gains seen earlier in the week.
According to Metal Bulletin, the price for benchmark 62% fines rose by 0.3% to $73.58 a tonne, extending its rally from the start of last week to 6.3%.
After surging 1.8% on Wednesday, the price for 58% fines continued to soar, climbing by another 1.3% to settle at $42.98 a tonne.
Both 62% and 58% grades now sit at the highest level since early March this year.
The price for 65% Brazilian fines rose by a more modest 0.1% to $97.20 a tonne.
“Prices jumped on the back of stronger steel margins and prices following the announcement of steel capacity cuts in China,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank. “A number of Chinese steel mills, including Jiangsu Yonggang Group, have been told to cut capacity by half in November.”
In the past, stronger steel prices have often helped to support gains in iron ore markets, reflecting the view that higher profit margins will prompt steel mills to up output levels as much as possible, even with ongoing restrictions on environmental grounds.
The across-the-board gains in spot markets came despite another plunge in Chinese stocks during the session, something that extended to selling in Chinese steel and bulk commodity on Thursday.
Rebar futures in Shanghai fell to 4,108 yuan, pulling back from 4,163 yuan struck on Wednesday evening. The January 2019 contract briefly hit the highest level in a month earlier in the week.
Profit-taking was also evident in iron ore, coking coal and coke futures traded separately in Dalian.
Iron ore eased to 517.5 yuan, down from Wednesday’s night session close of 522.5 yuan. Coking coal and coke contracts for delivery in January next year also softened, finishing the day at 1,384.5 yuan and 2,405 yuan respectively, down from 1,389 yuan and 2,444.5 yuan on Wednesday evening.
Unlike the trend seen during Thursday’s day session, futures finished mixed in overnight trade with rebar and iron ore contracts recouping losses while coke and coking coal continued to slide.
SHFE Rebar ¥4,117 , -0.87%
DCE Iron Ore ¥519.00 , -0.86%
DCE Coking Coal ¥1,388.50 , -0.22%
DCE Coke ¥2,422.00 , -1.12%
Trade in Chinese commodity futures will resume at midday AEDT, a hour before China will release a swathe of major economic data, headlined by Q3 GDP.
From a year earlier, GDP is expected to grow by 6.6%, a slight moderation from the 6.7% pace seen in the June quarter of this year. In the past three years, the GDP figure presented by the Chinese government has either been in line with market expectations or exceeded them by 0.1 percentage points.
As such, don’t be surprised to see a similar outcome on this occasion, nor a noticeable reaction in financial markets.
Given they’re more timely, there’s likely to be more interest in commodity markets on industrial output and urban fixed asset investment figures for September.
Industrial output is tipped to grow 6% from a year earlier, down marginally from 6.1% pace in the 12 months to August.
Urban fixed asset investment is seen lifting by 5.3% in the first nine months of the year compared to the same period a year earlier. Between January to August, investment grew 5.3% year-on-year.
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