Lower grade iron ore prices surge to multi-year highs

Feng Li/Getty Images
  • Mid and lower iron ore grades continued to rally on Tuesday, helped by reports of restocking by Chinese steel mills.
  • The price for 58% fines now sits at the highest level since September 2017, having rallied nearly 20% in just over a month.
  • Sino-US trade talks will continue into a third day today. They were originally scheduled to last only two.

Iron ore prices continued to rally on Tuesday, supported by reports of restocking by Chinese steel mills.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped 1.3% to $74.46 a tonne, leaving it at the highest level since November 20.

It’s now gained 15.9% from the nadir of $64.25 struck on November 26.

The price for 58% fines also jumped 1.3% for the session, settling at $47.61 a tonne, a level not seen since September 2017. From November 26, the price for 58% fines has surged by 19.9%, leaving it on the cusp of entering a technical bull market.

Unlike previous sessions where gains were recorded across all major grades, the price for 65% Brazilian fines held steady at $88.60 a tonne on Tuesday, seeing its premium over the benchmark narrow to the lowest level in 11 months.

One analyst put the gains in mid and lower grades down to restocking by Chinese steel mills ahead of a seasonal pickup in production ahead of the Northern hemisphere spring.

“Some steel mills in Tangshan and Xuzhou that restarted operations after emergency measures were lifted still need to replenish their stocks of raw materials,” Zhuo Guiqiu, an analyst at Jinrui Futures, told Reuters.

Some mills in these cities were ordered to halt or curb production levels in December to ensure environmental targets were achieved.

The gains in spot markets came despite a quiet session in Chinese steel and bulk commodity futures on Tuesday.

They did very little, moving only fractionally from Monday’s night session close. That theme continued in overnight trade with the most actively-traded rebar, hot-rolled coil, iron ore, coking coal and coke contracts almost unchanged from 24 hours earlier.

SHFE Hot Rolled Coil ¥3,413 , 0.41%
SHFE Rebar ¥3,509 , 0.17%
DCE Iron Ore ¥515.00 , 0.49%
DCE Coking Coal ¥1,188.00 , 0.13%
DCE Coke ¥1,953.50 , 0.03%

The lack of movement provides few clues as to whether the strength in spot markets will continue today. Trade in Chinese futures will resume at midday AEDT.

Following two days of talks in Beijing, trade negotiations between US and Chinese officials have been extended for a third day on Wednesday. Any headlines from the talks — either positive or negative — carry the potential to move both spot and futures pricing.

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