Iron ore prices lift again

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  • Iron ore spot markets continued to rise on Wednesday, adding to strong gains earlier in the week.
  • The benchmark price held steady at a seven-month high. Gains were recorded across lower and higher grades, especially the former.
  • Chinese steel and bulk commodity futures softened during Wednesday’s night session, pointing to a softer start ahead for spot markets. That comes with the disclaimer that they shut prior to an ugly selloff in US and European stocks.

Iron ore spot markets continued to rally on Wednesday, adding to strong gains seen earlier in the week.

However, with Chinese steel and bulk commodity futures giving back earlier gains in overnight trade, it looks like the upward momentum may stall on Thursday.

According to Metal Bulletin, the spot price for benchmark 62% fines was steady at $71.14 a tonne, consolidating following a 2.5% gain on Tuesday.

As such, it still remains at the highest level in seven months.

While the benchmark was static, there were further gains recorded across lower and higher grades.

The price for 58% fines surged 2.2% to $41.13 a tonne, completely reversing a similarly-sized decline seen on Monday.

The price for 65% fines from Brazil continued to grind higher, adding 0.3% to settle at $97.40 a tonne.

The continued strength in spot markets mirrored a similar performance from Chinese steel and bulk commodity futures during Wednesday’s trading session.

Rebar futures in Shanghai finished at 4,055 yuan, up marginally from Wednesday’s night session close of 4,042 yuan.

That helped to fuel gains in iron ore futures traded in Dalian which rose to 515 yuan, up from the prior night session close of 513 yuan.

Coking coal and coke futures also finished higher, adding to mammoth gains achieved earlier in the week.

They finished at 1,363.5 yuan 2,458.5 yuan respectively, up from Wednesday’s night session close of 1,336 yuan and 2,444 yuan, continuing to find support from renewed supply-side concerns.

On Tuesday, China’s Shanxi province, a major coal producing hub, announced that it will cut coking capacity and coke production over the next year to help improve air quality.

While all steel and bulk commodity contracts strengthened during the day session, those moves were largely reversed in overnight trade on Wednesday.

Here’s the closing scoreboard.

SHFE Rebar ¥4,007 , -0.89%
DCE Iron Ore ¥513.50 , -0.10%
DCE Coking Coal ¥1,365.50 , 0.77%
DCE Coke ¥2,453.50 , 0.29%

All contracts except for coking coal fell, led by a slide in rebar futures, pointing to the likelihood that spot markets may start off on a weaker footing today.

However, at this point, the losses are likely to be mild given the resilient performance from futures which may reflect that they ceased trading before an ugly selloff in European and US stocks occurred.

Trade in Chinese commodity futures will resume at midday AEDT. It will be interesting to see if they succumb to the selloff in riskier assets overnight.

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