- Iron ore spot markets rose across the board on Friday despite persistent weakness in steel markets.
- The benchmark price hit the highest level since March 2 this year.
- An expectation that Chinese steel production may remain plentiful over winter — despite environmental curbs — may explain the divergent price action seen on Friday.
- Chinese steel and bulk commodity futures all weakened on Friday evening, pointing to a soft start for spot markets on Monday.
Iron ore spot markets rose across the board on Friday despite persistent weakness in steel markets.
According to Metal Bulletin, the price for benchmark 62% fines jumped 1.2% to $77.20 a tonne, leaving it at the highest level since March 2 this year.
It’s now rallied 22.7% since early July.
Modest gains were also recorded across lower and higher grades during the session.
The price of 58% fines added 0.5% to $45.83 a tonne, slightly greater than the .4% gain for 65% Brazilian fines which settled at $97.20 a tonne.
The gains in spot markets came despite ongoing weakness in Chinese steel futures on Friday.
The 2019 rebar contract in Shanghai finished the day session at 3,933 yuan, down from 3,977 yuan on Thursday evening.
Iron ore futures in Dalian went in the other direction, finishing the session at 525 yuan, above Thursday’s night session close of 521.5 yuan. It briefly traded as high as 530.5 yuan earlier in the day, the highest level in a week.
“China’s steel production may not show any signs of weakening when the winter season starts from mid-November as China’s government will exercise flexibility in reining in production … as the pollution control efforts have made some progress,” said Helen Lau, Analyst at Argonaut Securities, in a note seen by Reuters.
Others said the divergence may reflect concern over temporary supply disruptions to seaborne iron ore markets following a train derailment on a railway line operated by BHP in Western Australia.
“While BHP said it expects partial resumption of its rail system early this week, it also admitted it doesn’t have enough iron ore stockpiled at the port to cover the losses from the train derailment,” Strategists at ANZ said.
“While BHP promised that its customers would not be let down on contracts, the market remains concerned.”
Unlike iron ore futures, coking coal and coke contracts also went backwards during the session, finishing at 1,343.5 and 2,351 yuan respectively, down from 1,353.5 and 2,379 yuan on Thursday evening.
While iron ore futures managed to buck the broader trend during the day session, it fell modestly in overnight trade on Friday, mirroring the move in broader steel and bulk commodity prices.
SHFE Hot Rolled Coil ¥3,608 -1.85%
SHFE Rebar ¥3,878 , -2.24%
DCE Iron Ore ¥521.00 , -0.57%
DCE Coking Coal ¥1,342.50 , -0.67%
DCE Coke ¥2,306.00 , -2.60%
The weakness suggests spot markets will begin trade on a softer footing on Monday.
Trade in Chinese commodity futures will resume at midday AEDT.