Iron ore prices lift ahead of key Chinese economic data

Kevin Frayer/Getty Images
  • Iron ore prices rose on Monday, helped by a large drawdown in Chinese port inventories and firmer steel futures in China.
  • Global crude steel output rose to 155 million tonnes in March, up 4.9% on a year earlier, according to the World Steel Association. China was the main factor behind the global increase.
  • Chinese manufacturing, non-manufacturing and steel industry PMIs for April will be released on Tuesday. They have generated volatility in spot and futures markets in the past.
  • Chinese markets will be closed from Wednesday for Labour Day holidays. They will remain closed for the remainder of the week.

Iron ore prices perked up on Monday, helped by another sizeable drawdown in Chinese port inventories and firmer steel markets.

According to Metal Bulletin, the spot price for benchmark 62% fines rose 0.5% to $94.05 a tonne, leaving it at the highest level in a week.

Stronger gains were seen across higher grades with 65% fines lifting 1.8% to $109.30 a tonne, leaving it within a whisker of the multi-year high of $109.70 struck earlier in the month.

Lower grades were the relative laggard for the session with 58% fines inching up two cents to $79.64 a tonne.

The gains followed the release of data showing Chinese iron ore port inventories fell heavily again last week.

Mysteel consultancy reported that inventories slumped by four million tonnes to 136 million tonnes, moving further away from the recent cyclical peak of 148.9 million tonnes set just two weeks ago.

At the margin, firmer steel futures may have also helped to support gains in physical markets.

Rebar and hot-rolled coil futures in Shanghai finished Monday’s day session at 3,777 and 3714 yuan respectively, up over 1% from Friday’s day session close.

That move was mirrored by bulk commodity contracts traded separately in Dalian with iron ore, coking coal and coke futures lifting to 634, 1,354.5 and 2,047 yuan respectively, up from 623.5, 1,352 and 2017 yuan on Friday evening.

As seen in the scoreboard below, all contracts bar coke continued to lift in overnight trade on Monday, led by impressive gains in steel futures, in particular.

SHFE Hot Rolled Coil ¥3,789 , 2.46%
SHFE Rebar ¥3,822 , 1.65%
DCE Iron Ore ¥635.00 , 1.44%
DCE Coking Coal ¥1,356.50 , 0.15%
DCE Coke ¥2,042.00 , 0.57%

On Monday, the World Steel Association released crude steel output data for March, revealing global production rose to 155 million tonnes, up 4.9% from a year earlier.

Chinese output surged by 10% to 80.3 million tonnes, offsetting a flat growth in all other nations combined.

Ahead of Labour Day holidays in China that will begin on Wednesday and run through to the end of the week, markets will receive updated manufacturing, non-manufacturing and steel industry PMIs from China on Tuesday, providing a potential catalyst for possible volatility in spot and futures markets. They have in the past, often resulting in multi-percentage moves in either direction.

All three reports will be released at 11am AEST, the same time Chinese commodity futures will resume trade. Futures markets will be closed for the remainder of the week from the end of Tuesday’s day session.

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