Iron ore just logged its first back-to-back gain in a month

Evans Vestal Ward / Photo: Bravo / NBCU Photo Bank via Getty Images.

Iron ore spot markets finished mixed on Monday following the return of Chinese traders following a week-long holiday.

According to Metal Bulletin, the price for benchmark 62% fines rose 0.7% to $62.67 a tonne, its first back-to-back increase since mid-September.

Higher grades also ticked higher with ore with 65% Fed content rising 0.5% to $84.60 a tonne.

In comparison, lower grades remained in the wars. The price of 58% fines slumped 1.6% to $38 a tonne.

Analysts at Deutsche Bank suggest the divergence between higher and lower grades likely reflects a preference from mills for higher quality, more efficient ore.

“The reduction in lower quality Induction Furnace (IF) capacity, rise in the coking coal, and strong demand has resulted in large blast furnaces increasing their consumption of higher grade 62-66% Fe at the expense of lower grade 56-60% Fe,” it says.

Higher grade ores are more efficient in the steel production process.

Short-term, Deutsche Bank says that upcoming steel production curbs beginning in mid-November could see the benchmark iron ore price fall below $60 a tonne.

“We think a demand ‘air pocket’ from Chinese steel production curbs over heating season from November 15 to March 15 could drive 62% Fe iron ore prices lower into the $50-60 a tonne range,” it says. “We now forecast $55 a tonne for [the December quarter] then a recovery to $70 a tonne by mid-2018.”

Hinting that iron ore spot markets may come under pressure today, Chinese rebar and iron ore futures finished deep in the red in overnight trade, reversing strong gains seen at the start of Monday’s day session.

Rebar futures in Shanghai tumbled 3.48% to 3,603 yuan, finishing well below the day session close of 3,701 yuan. Iron ore futures also held their day session losses, closing down 1.67% at 441.5 yuan.

Coking coal and coke futures also softened, reflecting weak sentiment towards the steel complex.

SHFE Rebar ¥3,603 , -3.48%
DCE Iron Ore ¥441.50 , -1.67%
DCE Coking Coal ¥1,085.50 , -2.16%
DCE Coke ¥1,863.00 , -2.61%

Trade in Chinese commodity futures will resume at midday AEDT.

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