Chinese iron ore futures are ripping higher

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  • Iron ore spot markets began to move on Monday as Chinese markets reopened following a week-long holiday.
  • Mid and higher iron ore grades slightly rose while lower grades fell heavily.
  • Dalian iron ore futures surged during Monday’s night session, pointing to early strength in spot markets on Tuesday.

Iron ore markets stirred from their slumber on Monday, coinciding with the resumption of trade in China following a week-long holiday.

Gains were recorded across mid and higher grades, masking weakness in cheaper, lower grade ores.

However, with Dalian iron ore futures ripping higher in overnight trade on Monday, it looks like all grades may start on a firmer footing on Tuesday.

According to Metal Bulletin, the spot price for benchmark 62% fines rose 0.25% to $69.41 a tonne, registering its first movement in over a week.

Higher grade ore also inched higher with the price for 65% Brazilian fines lifting 0.1% to settle at $96.40 a tonne.

In contrast to the gains in higher grades, the price of 58% fines slumped, falling 1.3% to $40.09 a tonne.

The mixed performance in spot markets followed a volatile session in Chinese steel and bulk commodity futures which resumed trade following National Day holidays.

Rebar and hot-rolled coil futures in Shanghai finished Monday’s day session at 3,971 and 3,891 yuan respectively, up 0.7% and 1.2% from the close of September 28.

Both contracts recovered from earlier losses, helping to support gains in bulk commodity contracts, especially the coal complex.

Coking coal futures in Dalian surged 5.9% to 1,332 yuan while the most actively-traded coke contract jumped 4.2% to 2,331.5 yuan.

The surge followed recent strength in spot markets, buoyed in part by supply concerns.

The price rally was driven by concerns over limited supply in major coal hub Shanxi province which has extended its non-heating season production curbs, according to Reuters.

News that China’s central bank, the PBoC, will cut the reserve ratio requirement (RRR) by 100 basis point for most Chinese lenders from October 15 may have also supported sentiment across the complex, raising hopes for a possible acceleration in lending in the months ahead.

While not to the same scale seen in coal, the strength in steel markets helped iron ore futures reverse earlier losses to close higher for the session.

The January 2019 contract rose 1% to finish at 498 yuan a tonne.

And the broad-based strength during Monday’s day session extended into overnight trade, as seen in the scoreboard below.

SHFE Rebar ¥3,990 , 1.24%
DCE Iron Ore ¥507.50 , 2.42%
DCE Coking Coal ¥1,327.50 , 1.69%
DCE Coke ¥2,317.00 , 1.00%

Coking coal and coke contracts held onto most of their earlier session gains while rebar futures continued to push higher.

After being a relative laggard earlier in the day, iron ore futures led the gains overnight, closing at 507.5 yuan.

The strength in futures points to the likelihood of gains in spot markets in early trade on Tuesday.

Chinese commodity futures will resume trade at midday AEDT.

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