Iron ore continues to benefit from stronger steel prices

Ruaridh Connellan / Barcroft USA via Getty ImagesIron ore. Going along for the ride.
  • Iron ore spot markets rallied on Friday, helped by continued strength in Chinese steel prices.
  • The benchmark iron ore spot price rose to a two-week high of $66.16.
  • Chinese steel and bulk commodity futures softened in overnight trade on Friday, hinting that spot markets may follow suit in early moves today.

Iron ore spot markets rallied on Friday, helped by continued strength in Chinese steel prices.

According to Metal Bulletin, the price for benchmark 62% fines jumped 1.3% to $66.16 a tonne, leaving it at the highest level since May 18.

Like the benchmark, both lower and higher grades rose on Friday.

The price for 58% and 65% fines added 0.7% apiece, closing the session at $38.56 a tonne and $86.40 a tonne respectively.

The across-the-board gains followed another surge in Chinese steel futures in Shanghai.

The October 2018 rebar contract finished Friday’s day session at 3,770 yuan, up from Thursday’s night session close of 2,104.50 yuan.

It briefly traded as high as 3,778 yuan, a level not seen since March 7.

Analysts put the continued strength in steel markets down to falling inventory levels, solid economic data and output restrictions in some parts of China.

“We think the recent price increase was associated with supply concerns since some regions have continued to implement production restrictions and some mills have gone on maintenance since mid-May,” Richard Lu, Analyst at CRU in Beijing, told Reuters.

Helen Lau, Analyst at Argonaut Securities, agreed with Lu’s assessment.

“China’s domestic steel market is currently struggling with supply tightness as a new round of environmental protection investigation which will last for one month has just started,” she told Reuters.

The strength in Chinese steel markets flowed through to iron ore futures traded separately in Dalian with the September 2018 contract closing at 467 yuan, up marginally from 465.50 yuan on Friday evening.

Both coking coal and coke futures also finished flat-to-higher from Thursday’s night session close.

However, hinting that spot markets may come under some selling pressure today, all contracts fell modestly in overnight trade on Friday.

Here’s the final scoreboard.

SHFE Rebar ¥3,752 , 0.35%
DCE Iron Ore ¥461.00 , -0.75%
DCE Coking Coal ¥1,257.00 , 0.28%
DCE Coke ¥2,095.00 , -0.14%

Trade in Chinese commodity futures will resume at 11am AEST.

Updated rebar and iron ore inventory data from China is also expected to arrive during the session.

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