Iron ore futures have suddenly bounced

Jeff J Mitchell/Getty Images
  • Iron ore spot markets closed mixed on Thursday, largely reversing the moves seen a day earlier.
  • Chinese new home prices surged by 1% in October, led by gains in smaller cities. These locations are where the vast bulk of residential construction takes place in China.
  • Chinese steel and bulk commodity futures rallied during Thursday’s night session, hinting that spot markets may follow suit on Friday.

Iron ore spot markets closed mixed on Thursday, largely reversing the moves seen a day earlier.

However, with strong gains in Chinese bulk commodity futures on Thursday evening, spot markets may well follow suit on Friday.

According to Metal Bulletin, the price for benchmark 62% fines slumped 1.3% to $74.93 a tonne, leaving it at a two-week low.

In contrast to the benchmark price, lower and higher grades inched higher.

The price for 65% Brazilian fines rose 0.3% to $94.70 a tonne while 58% fines rose by two cents to $44.73 a tonne.

The former had fallen to a more that two-month low on Wednesday.

The mixed price performance came despite data showing Chinese new home prices surged by another 1% in October, accelerating from the 0.9% increase seen in September.

The gains were led by smaller tier-three cities, where the vast bulk of Chinese residential construction is concentrated.

From a year earlier, prices nationwide rose by 8.6%, the fastest increase since July last year.

While spot markets weren’t inspired by the data, futures traders were, pushing bulk commodity contracts higher late trade.

Iron ore futures finished the session at 513.5 yuan, up from 509 yuan on Wednesday evening. Coking coal and coke contracts also rallied, ending trade at 1,382 and 2,382 yuan respectively, up from the prior close of 1,359 and 2,3858.5 yuan.

While the bulks rallied, rebar futures in Shanghai weakened, finishing trade at 3,889 yuan, down from 3,926 on Wednesday evening.

Some put the divergence down to speculation that industrial output curbs in China during winter will not be as onerous as they were a year ago, an outcome, if correct, that could increase supply of steel and demand for raw materials.

However, as seen in the scoreboard below, there was no divergence between the contracts in overnight trade on Thursday.

Everything rallied.

SHFE Hot Rolled Coil ¥3,643 1.11%
SHFE Rebar ¥3,942 , 1.05%
DCE Iron Ore ¥523.00 , 2.45%
DCE Coking Coal ¥1,389.00 , 2.06%
DCE Coke ¥2,422.00 , 2.95%

The strong gains in futures markets suggests spot markets may follow that lead today.

Chinese commodity futures will resume at midday AEDT.

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