The iron ore rally keeps on keeping on

Todd Korol/Getty Images
  • Iron ore spot markets continue to rally, closing at fresh multi-month or multi-year highs.
  • The gains were once again led by lower grades, partially reflecting a relaxation of steel production restrictions over the Chinese winter compared to those implemented 12 months earlier.
  • Chinese steel output rose to a record high of 928.3 million tonnes last year.

Iron ore spot markets continue to rally, underpinned by strengthening Chinese demand.

According to Metal Bulletin, the price for benchmark 62% fines rose 0.3% to $75.90 a tonne, leaving it at the highest level since November 19.

65% Brazilian fines outpaced the benchmark, lifting 0.8% to a two-month high of $90 a tonne.

The price of 58% fines was yet again the standout performer for the session, surging by a further 1.5% to $52.59 a tonne. It now sits at a level not seen since August 2017, narrowing its price discount to the benchmark to the narrowest level since late July 2017.

All three grades now sit at fresh multi-month or multi-year highs, having rallied in each of the past four sessions.

Darren Toh, a data scientist at iron ore data analytics company Tivlon Technologies, put the continued gains down to strengthening demand in China.

“Our sintering data analytics model is seeing a pick up in iron ore utilisation over the last two weeks,” he told Reuters.

Toh expects Chinese iron ore demand will continue to improve over the next 10 weeks, underpinned by an expectation that authorities will relax anti-pollution measures in the first half of the year.

Perhaps contributing to the strength seen in iron ore markets, Chinese steel futures held onto most of the gains achieved on Friday evening.

Rebar futures finished trade at 3,645 yuan, just off the multi-month high of 3,669 yuan it closed on Friday evening. Hot-rolled coil futures also softened marginally, easing from 3,354 yuan to 3,515 yuan during the session.

Steel prices surged on Friday on reports of further production curbs being introduced in Hebei, a northern Chinese province famed for its heavy industry.

Reflecting the impact of environmental curbs to improve air quality in northern China over winter, Chinese steel output stood at 76.12 million tonnes in December, the smallest monthly total since March 2018. However, reflecting that output restrictions are not as strict as they were in late 2017, December output was still up 8.2% from a year earlier.

Over the entirety of 2018, Chinese steel output jumped to 928.3 million tonnes, up 6.6% on 2017 and the highest level on record.

While steel and bulk commodity futures eased lower over Monday’s day session, those moves were reversed, and then some, in overnight trade.

SHFE Hot Rolled Coil ¥3,591 , 2.08%
SHFE Rebar ¥3,689 , 1.18%
DCE Iron Ore ¥536.00 , 0.56%
DCE Coking Coal ¥1,215.00 , -1.22%
DCE Coke ¥2,038.50 , -0.63%

Steel futures recorded the largest reversal, finishing the session at multi-month highs.

That helped to drag bulk commodity futures higher in Dalian, led by iron ore which moved back towards 10-month highs struck earlier in the day.

Trade in Chinese commodity futures will resume at midday AEDT.

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