Iron ore catches a bid as steel prices surge again

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  • Iron ore prices rose on Thursday, supported by continued strength in steel prices and an improvement in investor risk appetite.
  • Analysts suggest steel prices are being supported by both supply and demand factors at present.
  • China will release international trade figures for June in the second half of the Asian session.

Iron ore spot markets rose on Thursday, supported by continued strength in steel prices and an improvement in investor risk appetite.

According to Metal Bulletin, the price for benchmark 62% fines jumped 1.1% to $64.06 a tonne, the largest increase since June 26.

It now sits at one-week high.

Like the benchmark, both higher and lower grades recorded strong gains for the session.

The price of 65% fines added 0.9% to $37.58 a tonne, outpacing a 0.8% increase for 65% fines which settled at $91.50 a tonne.

The across-the-broad gains was undoubtedly helped by another surge in Chinese steel prices.

Rebar futures in Shanghai surged to as high as 3,990 yuan — the highest level since September 2017 — before finishing the session at 3,976 yuan.

That was higher than Wednesday’s night session close of 3,944 yuan.
Analysts put the continued strength in steel prices down to an ongoing push from regulators to improve air quality in northern Chinese provinces.

According to Reuters, China’s cabinet has launched a new cross-ministerial leadership group that will draw up plans to tackle air pollution in northern regions.

“The high-class leadership group will certainly be a strong deterrent to environmental violations and may also restrain output at mills and mines,” Zhuo Guiqiu, an analyst at Jinrui Futures, told Reuters.

Along with temporary output curbs in the major steel hub of Tangshan, this may have contributed to continued buying in steel futures.

A continued draw in Chinese steel inventories may also be feeding into the bullish price momentum.

“The levels of absolute distributor inventories are at one of the lowest in the last decade for this time of the year,” said analysts at Citibank’s metals and mining equities team.

Citibank

“Only in 2016 and 2017 have inventories been lower at this time of the year and both were years which saw significant increases in steel prices and steel spreads over the remaining six months of the year.”

With steel prices being supported by supply and demand factors, as well as a general lift in investor sentiment on Thursday, it helped to underpin bulk commodity futures during the session.

Dalian iron ore finished trade at 466 yuan, climbing from Wednesday’s night session close of 463 yuan.

In comparison, coking coal and coke contracts eased marginally, finishing at 1,153.5 and 2,069.5 yuan respectively.

As seen in the chart below, there was very little movement on those closing levels during Thursday’s night session.

SHFE Rebar ¥3,987 , 1.27%
DCE Iron Ore ¥466.50 , 0.43%
DCE Coking Coal ¥1,152.50 , -0.26%
DCE Coke ¥2,061.50 , 0.15%

Chinese commodity futures reopen at 11am AEST, around two hours before the release of Chinese international trade data for June, including iron ore imports and steel exports figures.

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