Iron ore prices crawl higher

Getty/Scott Barbour Hard slog.
  • Iron ore spot and futures markets rose modestly on Wednesday.
  • Futures were supported by speculation over supply disruptions and temporary steel production curbs due to environmental concerns.
  • Chinese steel and iron ore futures continued to rally in overnight trade.

Iron ore markets rose modestly on Wednesday.

According to Metal Bulletin, the spot price for benchmark 62% fines rose 0.3% to $66.56 a tonne, leaving it at a three-week high.

It was the first back-to-back gain since the middle of May.

Continuing the pattern of the previous session, higher grades continued to outperform.

The price for 65% fines increased 0.7% to $87.60 a tonne. In contrast, the price for 58% fines added just 0.1% to $38.55 a tonne.

Chinese iron ore port inventories rose to the highest level on record last week, according to data from Steelhome consultancy. Though difficult to know the exact proportion, the vast majority is believed to be less-efficient lower grades.

The strength in spot markets was replicated in Chinese futures, both overnight on Tuesday and again on Wednesday.

Dalian iron ore futures finished Wednesday’s day session at 470.5 yuan, clinging onto most of the strong gains achieved during Tuesday’s night session.

It briefly rose to as high as 476 yuan, the highest level in over two weeks.

Reuters said futures were supported by news of an explosion at an iron ore mining project in China’s northeastern province of Liaoning on Tuesday, raising concern about potential supply-side constraints.

However, the project wasn’t due to open until 2019, hinting that the move in spot and futures markets was likely driven by other factors.

Reports that steel mills in the Chinese city of Tangshan had been asked to cut output to help curb pollution may have been a factor, helping to boost rebar futures in Shanghai.

Sintering and shaft furnaces at steel mills in some regions in the city were ordered to shut from June 5 to June 7 due to weather conditions conducive to pollution, Reuters reported.

That saw the October 2018 rebar contract finished the session at 3,776 yuan, up from Tuesday’s night session close of 3,742 yuan.

It’s not unusual for iron ore futures to follow the movements in steel prices, especially for mid and higher grades.

As seen in the scoreboard below, both rebar and iron ore futures continued to rally in overnight trade, pointing to a firmer start for spot markets on Thursday.

SHFE Rebar ¥3,803 , 1.39%
DCE Iron Ore ¥474.00 , 0.64%
DCE Coking Coal ¥1,245.50 , 0.28%
DCE Coke ¥2,047.50 , 0.79%

Trade in Chinese commodity futures will resume at 11am AEST.

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