Iron ore prices surge -- and it looks like there's more gains to come

Photo by Cameron Spencer/Getty Images
  • Iron ore spot and futures prices surged on Wednesday.
  • Signs of strengthening Chinese steel demand helped to boost sentiment across the steel complex.
  • Rebar and iron ore futures jumped again in overnight trade, pointing to the likelihood that spot markets may follow suit today.

Iron ore prices surged on Wednesday, driven by signs Chinese steel demand is continuing to improve.

And with Chinese futures up again in overnight trade, it looks like the rally may continue on Thursday.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped 2.4% to $66.98 a tonne, snapping a five-session losing streak in the process.

It was the largest percentage gain since April 19.

Smaller gains were seen across lower and higher grades.

58% fines rose 1.2% to $39.94 a tonne while 65% fines added 1.3% to settle at $85.30 a tonne.

The bounce in spot markets followed a similarly-sized rally in Chinese steel and iron ore futures during the session.

Rebar futures in Shanghai closed up 2.8% at 3,675 yuan, the highest level seen in two months. It hit 3,687 yuan at one point during the session.

The strength flowed through to iron ore futures in Dalian which finished at 464.5 yuan a tonne, up 0.2% from Friday’s day session close. Like rebar, it too traded at significantly higher levels earlier in the session.

Spot and futures markets were assisted by news that Chinese inventories of rebar and iron ore continued to decline last week, hinting that demand is continuing to improve as the spring construction season ramps up.

According to Thomson Reuters, citing data from Steelhome Consultancy, rebar inventories held traders dropped to 7.13 million tonnes last week, leaving the decline from mid-March at 27.2%.

Adding to optimism over the demand outlook, separate data revealed iron ore port inventories fell by 500,000 tonnes to 159.28 million tonnes over the same period.

Reports that Jiangsu Shagang Group, China’s biggest privately-owned steel firm by capacity, increased spot prices for rebar by 130 yuan to 4,070 yuan a tonne in May was another factor that helped to boost sentiment during the session.

Hinting that iron ore spot markets may continue today, Chinese rebar and iron ore futures surged again in overnight trade.

Here’s the final scoreboard.

SHFE Rebar ¥3,724 , 1.28%
DCE Iron Ore ¥479.50 , 2.35%

Both contracts finished significantly above Wednesday’s day session close, an outcome that should assist spot markets on Thursday, at least in early trades.

All Chinese commodity futures will resume trade at 11am AEST.

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