Chinese iron ore futures are ripping higher once again

ARUN SANKAR / AFP / Getty Images

Iron ore spot markets finished mixed on Thursday with higher grades rising strongly while lower grades fell.

However, with Chinese futures surging higher overnight, it sets the scene for a strong day on Friday despite news that United States president Donald Trump has launched an investigation to determine whether foreign-made steel poses a threat to US steelmakers and national security.

According to Metal Bulletin, the spot price for benchmark 62% fines rose by a further 1.2% to $65.36 a dry tonne on Thursday, trimming its year-to-date decline to 17.1%.

It was the first time that back-to-back gains were recorded since early April, extending its rally from the six-month low of $63.20 a tonne struck on Tuesday to 3.4%.

The rebound in the benchmark price corresponded with improved sentiment among steel market participants in northern China.

“North China’s spot rebar prices picked up on Thursday as buyers stepped up their procurement. Buyers.. think prices had fallen low enough,” said Metal Bulletin.

“The recovery in demand pushed up prices slightly.”

That appears to have supported iron ore markets, along with a late surge in Chinese rebar and iron ore futures late in Thursday’s session.

However, while higher grades rose strongly, lower grades underperformed. Metal Bulletin said the spot price for 58% fines fell 1% to $39.64 a tonne.

While spot markets finished mixed on Thursday, the performance from Chinese futures overnight suggests there’s likely to be broad-based gains on Friday.

The most actively traded September 2017 iron ore future on the Dalian Commodities Exchange rocketed higher, closing the session up a hefty 4.2% at 497 yuan per tonne. It had earlier fallen to as low as 460 yuan per tonne during Thursday’s day session.

Rebar futures traded separately on the Shanghai Futures Exchange also popped higher, rising 2.8% to 2,975 yuan a tonne.

Coking coal, coke, zinc and nickel prices also performed strongly.

Here’s the final scoreboard from overnight trade.

SHFE Zinc ¥21,595 , 3.35%
SHFE Nickel ¥79,580 , 0.75%
SHFE Rebar ¥2,975 , 2.80%
DCE Iron Ore ¥497.00 , 4.19%
DCE Coking Coal ¥1,136.50 , 4.89%
DCE Coke ¥1,631.50 , 4.72%

Though enormous in scale, they came before the news that the US had launched an investigation into whether imports of foreign steel were a threat to US steelmakers and national security.

“For decades America has lost our jobs and our factories to unfair foreign trade,” Trump said on Thursday. “And one steel mill after another has been shut down, abandoned, and closed. And we’re going to reverse that.”

That rhetoric clearly poses a threat to steel producers outside the US, especially in China which accounts for around half of global steel production.

There’ll be plenty of interest on what will happen in Chinese commodity futures once trade gets underway at 11am AEST.

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