It looks like a wild day for iron ore traders after they bought the dip yesterday

Photo: Brendon Thorne/ Getty.
  • Iron ore spot markets rallied across the board on Monday, partially reversing losses seen on Friday.
  • The sharp turnaround followed news that Chinese rebar and iron ore inventories fell last week.
  • Chinese futures were relatively unchanged in overnight trade on Monday.

Iron ore spot markets rallied across the board on Monday, continuing the volatile price action seen in recent weeks.

According to Metal Bulletin, the price for benchmark 62% fines rose 0.9% to $ 67.67 a tonne, partially reversing a 2% decline reported a day earlier.

The benchmark has now moved by 0.9% or more in each of the past six trading sessions, adding 5.9% over this period.

Modest gains were also reported across higher and lower grades on Monday.

65% fines added 0.8% to settle at $85.60 a tonne. 58% fines rose by the same margin, lifting 0.8% to $39.98 a tonne.

The sharp turnaround, unwinding much of the losses seen on Friday, coincided with news that Chinese rebar and iron ore inventories fell again last week, adding to optimism over the outlook for Chinese steel demand.

According to Reuters, citing data from Mysteel Consultancy, rebar inventories held by Chinese traders fell to 8.252 million tonnes, well below the 8.68 million tonne level reported a week earlier.

Rebar inventories have now fallen 16% from mid-March.

Chinese iron ore port inventories also declined over the week, falling marginally to 159.78 million tonnes.

Both suggest demand for steel and its raw ingredients strengthened during the week.

There were also reports that steelmakers increased product prices over the weekend in anticipation of firmer demand, an unnamed iron ore trader in Shanghai told Reuters.

“The construction steel market may have more room to strengthen,” he said.

Chinese rebar futures rocketed higher following the release of the data, surging to as high as 3,555 yuan a tonne at one point, the highest level since March 16.

It eventually closed Monday’s day session at 3,544 yuan a tonne.

The strength in steel markets flowed through to iron ore futures in Dalian which jumped 2.1% to 477 yuan a tonne, completely reversing all of the the losses seen on Friday.

At one point during the session, the September 2018 contract jumped to 482.5 yuan a tonne, a fresh one-month high.

Providing few clues as to whether the rally will extend into Tuesday’s trading session, both contracts were relatively unchanged in overnight trade.

SHFE Rebar ¥3,550 , 1.14%
DCE Iron Ore ¥476.00 , 0.95%

Rebar futures were moderately higher while iron ore futures were fractionally lower.

Trade in Chinese commodity futures will resume at 11am AEDT. If the theme of recent weeks is to be repeated, the price action is likely to be wild.

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