Iron ore is quickly closing in $100, surging to 5-year highs

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  • Iron ore prices surged across the board on Thursday.
  • The price for benchmark 62% fines and 58% fines settled at five-year highs. 65% closed at the highest level on record.
  • Chinese steel and iron ore futures continued to climb in overnight trade on Thursday. If sustained on Friday, the benchmark price could top $100 a tonne.

Iron ore markets surged on Thursday with the benchmark price coming within a whisker of closing above the $100 a tonne level for the first time in five years.

With Chinese futures soaring again in overnight trade on Thursday, the benchmark price may well reclaim this level on Friday.

According to Metal Bulletin, the benchmark price for 62% fines jumped 2.3% to $99.21 a tonne, adding to the 2.8% gain seen on Wednesday.

It settled at the highest level since May 16, 2014, the exact date five years earlier.

Like the benchmark, both lower and higher grades logged significant gains during the session.

58% fines rose 1.8% to $83.60 a tonne, leaving it at the highest level since May 15, 2014.

65% fines gained 1.2%, settling at $113.50 a tonne. That was the highest level since Metal Bulletin first produced pricing for the grade at the start of 2016.

The rebound in iron ore physical markets mirrored the price action in Chinese steel and bulk commodity futures on Thursday.

Rebar and hot-rolled coil futures traded in Shanghai rose to 3,742 and 3,652 yuan, up from Wednesday’s night session close of 3,719 and 3,634 yuan.

Along with firmer steel prices, supply disruptions as a result of a deadly accident at an iron ore mine operated by Brazil’s Vale in late January has helped to support buying in both physical and futures markets in recent months.

“Investors continue to fret about iron ore supply disruptions in Brazil,” said Daniel Hynes, Commodity Analyst at ANZ Bank.

“A senior Brazilian official said that production may drop by 10% this year, with the 2020 outlook also unclear.”

Demand in China, the world’s largest iron ore consumer, is also strong with steel output soaring to the highest level on record in April, according to data released by China’s National Bureau of Statistics earlier this week.

“[Sentiment] was boosted this week after data showed strong steel production in China,” Hynes said. “The output of crude steel surged to 85 million tonnes in April, up 13% year-on-year.”

With Chinese steel production ramping up, Dalian iron ore futures soared on Thursday with the September 2019 contract climbing to fresh record highs.

It finished trade at 680.5 yuan, well above the 658.5 yuan level it closed on Wednesday evening.

In contrast, coking coal and coke futures were largely unchanged from the prior night session close, finishing at 1,369 and 2,139 yuan respectively.

The bullish price action in steel and iron ore futures continued in overnight trade on Thursday.

SHFE Hot Rolled Coil ¥3,688 , 1.29%
SHFE Rebar ¥3,779 , 1.50%
DCE Iron Ore ¥689.00 , 2.68%
DCE Coking Coal ¥1,375.50 , 0.73%
DCE Coke ¥2,143.50 , 0.07%

Should the gains in futures be reflective of those in physical markets on Friday, there’s a reasonable chance the benchmark iron ore price could climb above $100 a tonne.

Chinese commodity futures will resume trade at 11am AEST. Metal Bulletin will release its iron ore index around 9pm Sydney time this evening.

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