Iron ore blasts above $100 for the first time in years

  • Iron ore prices continue to surge, closing at fresh multi-year highs on Friday.
  • The benchmark price blasted through the $100 a tonne level for the first time since May 2014.
  • Chinese steel mills continued to ramp up production levels last week. Despite that, steel inventories held by Chinese traders continued to fall.
  • Iron ore is Australia’s largest export item in terms of dollar value.

Iron ore prices continue to surge, closing at fresh multi-year highs on Friday.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped 2.5% to $101.70 a tonne, surpassing the $100 a tonne level for the first time since mid-May, 2014.

From November 26 last year the benchmark has now gained 58%.

Similar gains were also seen across lower and higher grades on Friday.

58% fines rose 1.8% to $85.12 a tonne, extending the rally from late November 2018 to a mind-boggling 114%. The price for 65% fines also surged 1.9% to $115.60 a tonne.

Both 58% and 65% fines, like the benchmark, also sit at multi-year highs.

Concerns about disruptions to Brazilian iron ore supply, along with record Chinese steel production, have helped to fuel price gains in both spot and physical markets since late January this year.

The gains in iron ore spot markets were mirrored in Dalian futures which closed at record highs on Friday.

The September 2019 contract jumped to 710 yuan, up sharply from Thursday’s night session close of 689 yuan.

“Investors expect firm demand for steelmaking raw materials despite high prices as mills would still ramp up output amid strong profitability,” a Shanghai-based trader told Reuters.

Sentiment may have been helped by the release of data from Mysteel Consultancy that revealed utilisation rates at Chinese steel mills rose 0.28 percentage points to 69.06% during the week. That increase came despite tougher output restrictions being rolled out in Tangshan, China’s largest steel production hub.

Following several days of solid gains, the rally in Chinese rebar and hot-rolled coil futures in Shanghai paused on Friday with the most actively traded contracts slipping to 3,771 and 3,682 yuan respectively, down marginally from Thursday’s night session close of 3,779 and 3,688 yuan.

That was despite separate data from Mysteel showing inventories of rebar and hot-rolled coil steel product at Chinese traders fell 350,300 and 82,700 tonnes respectively last week, indicating continued strength in demand given utilisation rates rose over the same period.

Providing few clues as to what direction physical markets will move on Monday, both steel and iron ore futures finished near-unchanged in overnight trade on Friday.

SHFE Hot Rolled Coil ¥3,681 , -0.03%
SHFE Rebar ¥3,779 , 0.19%
DCE Iron Ore ¥709.00 , 1.94%
DCE Coking Coal ¥1,387.50 , 0.43%
DCE Coke ¥2,153.00 , -0.02%

Chinese commodity futures will resume trade at 11am AEST.

“Falling iron ore port stockpiles, together with resilient steel mill margins and higher steel operating rates are now supporting iron ore prices,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank.

“Given the scope for China’s iron ore port stockpiles to fall further, we could see prices stay above $100 a tonne for a little longer yet.”

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