Iron ore prices keep on grinding higher

Matt Cardy/Getty ImagesTough slog, but getting there.
  • The benchmark iron ore spot price hit a six-week high on Wednesday.
  • Chinese steel prices continued to rally, underpinned by production curbs and speculation over the potential for further stimulus to be delivered by Chinese policymakers.
  • Steel and bulk commodity futures fell in overnight trade. However, other commodity markets have rallied since they closed, suggesting futures may follow suit when they reopen today.

Iron ore prices keep on grinding higher.

According to Metal Bulletin, the spot price for benchmark 62% fines rose 0.7% to $66.03 a tonne on Wednesday, leaving it at the highest level since June 19.

As seen in the chart below, it’s been a slow grind higher for the benchmark in recent weeks, moving back toward the centre of the trading range its been stuck in since the end of March.

The price action also remains choppy with the price moving the opposite direction to the day before in each of the past five sessions.

Like the benchmark, lower grade ores also gained with the price for 58% fines adding 0.5% to settle at $38.87 a tonne.

Higher grades managed to buck the broader trend with 65% fines holding steady at $92 a tonne.

Unusually, the underperformance of higher grades came despite renewed strength in Chinese steel prices on Wednesday.

Rebar futures in Shanghai finished trade at 4,017 yuan, higher than Tuesday’s night session close of 3,991 yuan. The October 2018 contract briefly hit a high of 4,033, a level not seen since September last year.

Continued production curbs, along with improved optimism towards the demand outlook following fiscal easing measures announced by Chinese policymakers earlier in the week, likely helped to underpin gains.

However, despite strength in steel markets, bulk commodity contracts went in the other direction with iron ore, coking coal and coke futures in Dalian finishing the session at 476.5, 1,197 and 2,141.5 yuan respectively.

With the exception of the latter which finished steady, all other contracts fell from Tuesday’s night session close.

As seen in the scoreboard below, rebar and bulk commodity futures all softened marginally in overnight trade.

SHFE Rebar ¥3,995 , -0.22%
DCE Iron Ore ¥474.00 , -0.52%
DCE Coking Coal ¥1,190.50 , -0.79%
DCE Coke ¥2,132.00 , -0.19%

Given strength seen in other commodity markets after Chinese futures closed, it will be interesting to see whether that is reflected in the price action seen today.

Chinese commodity futures will resume trade at 11am AEST.

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