- Iron ore prices rallied on Thursday, led by higher grades.
- Chinese steel output rose by nearly 10% in the first two months of the year compared to the same period in 2018. Chinese fixed asset investment is also starting to lift on the back of fresh stimulus spending.
- Chinese steel and bulk commodity futures finished mixed during Thursday’s night session, providing few clues as to what direction physical markets will move on Friday.
Iron ore prices rose across the board on Thursday, encouraged by signs of strengthening demand in China, the world’s largest iron ore consumer.
According to Metal Bulletin, the spot price for benchmark 62% fines jumped 2.9% to $87.26 a tonne, leaving it at a one-week high.
Prices for higher grades also rallied with 65% fines lifting 2.2% to $98.20 a tonne.
58% fines was the relative laggard, increasing by only 0.6% to a three-week high of $69.37 a tonne.
The surge in spot markets was mirrored by Chinese iron ore futures traded in Dalian.
After finishing Wednesday’s night session at 615.5 yuan, the May 2019 contract rose to as high as 623.5 yuan on Thursday before easing modestly into the close.
Coking coal and coke contracts also climbed, lifting to as high as 1,242 and 2,016.5 yuan respectively, up from 1237.5 and 2,007 yuan on Wednesday evening.
However, while bulk commodity contracts rallied, rebar and hot-rolled coil futures in Shanghai went backwards, dropping to as low as 3,762 and 3,703 yuan respectively, down from Wednesday’s night session close of 3,802 and 3,743 yuan.
“Bulk commodity markets bucked the trend to push higher as Chinese restrictions on steel mills were lifted,” said analysts at ANZ Bank.
“The Chinese steel hub of Tangshan removed emergency restrictions on sinter plants, which had been in place since the start of the month.”
Tangshan, located in China’s Hebei province, its the largest steel production hub in the country.
The release of Chinese industrial output figures for the first two months of the year, including Chinese steel production, may have also contributed to the divergent price performance in bulk and steel futures on Thursday.
According to China’s National Bureau of Statistics (NBS), steel production surged to 149.58 million tonnes over January and February, up 9.2% on the same period a year earlier. The increase largely reflects that output restrictions on environmental grounds were not as strict this year as they were in 2018.
Further boosting sentiment on the outlook for iron ore demand, Chinese fixed-asset investment in urban areas rose by 6.1% in January and February compared to the same period a year earlier, an acceleration on the 5.9% increase reported throughout 2018.
Providing few clues as to what direction physical markets may move on Friday, Chinese bulk commodity and steel futures finished mixed in overnight trade on Thursday.
Coking coal and rebar contracts rose modestly while coke and hot-rolled coil futures went backwards. Iron ore was near-unchanged.
SHFE Hot Rolled Coil ¥3,677 , -1.32%
SHFE Rebar ¥3,773 , -0.55%
DCE Iron Ore ¥621.50 , 0.65%
DCE Coking Coal ¥1,246.00 , 1.14%
DCE Coke ¥1,990.00 , -0.48%
Trade in Chinese commodity futures will resume at midday AEDT.
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