Iron ore spot markets ripped higher once again on Thursday, closing at the highest level in over two months.
According to Metal Bulletin, the price for benchmark 62% fines jumped by 3.9% to $67.69 a tonne, adding to the mammoth 4.3% surge recorded on Wednesday.
The benchmark is now up 15.7% in November, and sits at the highest level since September 20.
Elsewhere the price for 58% fines added 5.4% for the session, closing at $38.34 a tonne. Ore with 65% Fe content rose by a smaller 1.1%, finishing at $84.30 a tonne.
The gains in spot markets mirrored another strong rally in Chinese futures on Thursday.
Iron ore futures in Dalian rose by 3.1% to 507.50 yuan, having earlier hit a 10-week high of 513.5 yuan. That move coincided with further strength in rebar futures in Shanghai which closed up 0.8% at 3,826 yuan.
Chinese steel prices have been rallying in recent weeks as the government enforced steel production cuts on environmental grounds and firm demand acts to keep prices at elevated levels.
To Robert Rennie, head of market strategy at Westpac, iron ore is likely to remain supported as long as steel prices remain at current levels.
“As long as these super high steel prices remain in China, it’s hard to generate a scenario where iron ore can fall much,” he says, noting that steel prices currently sit at six-year highs while iron ore recently fell to the lowest level in close to a year.
After two massive back-to-back increases, the early signs point the likelihood that the rally in iron ore spot markets may take a breather on Friday.
Chinese futures slipped marginally overnight, as seen in the closing scoreboard below.
SHFE Rebar ¥3,811 , -0.47%
DCE Iron Ore ¥505.50 , -0.10%
DCE Coking Coal ¥1,299.50 , -0.04%
DCE Coke ¥2,070.00 , -0.02%
While not an enormous reversal by any stretch, it suggests a degree of caution from traders following some rollicking gains in recent days.
Trade in Chinese commodity futures will resume at midday AEDT.