The iron ore rally takes a breather

Kevin Frayer/Getty Images
  • Small movements were seen across iron ore spot markets on Thursday.
  • All major grades closed at multi-year highs on Wednesday.
  • Chinese markets will be closed on Friday for the Tomb Sweeping holiday.

The rally in iron ore spot markets took a breather on Thursday with modest moves seen across all grades.

According to Metal Bulletin, the price for benchmark 62% fines slipped 0.2% to $92.90 a tonne, pulling back having hit a multi-year high in the prior session.

In contrast, prices for both lower and higher grades continued to inch higher.

58% fines rose by a further 0.4% to $76.84 a tonne, closing at fresh five-year highs. 65% fines increased by a smaller 0.2% to $105 a tonne, leaving it at the highest level in over two years.

The mixed price performance came despite another burst of buying in Dalian iron ore futures. After closing Wednesday’s night session at 678 yuan, the May 2019 contract jumped to as high as 694.5 yuan before finishing trade at 687.5 yuan.

The continued rally in spot and futures markets has seen analysts scramble to upgrade their price forecasts for the year ahead

According to Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank, the benchmark iron ore price is likely to remain above $90 a tonne in the near-term due to supply disruptions in Brazil and Australia.

With seaborne supply now temporarily constrained, and with Chinese policymakers rolling out an additional 800 billion yuan in infrastructure projects this year, he anticipates an “aggressive fall” in Chinese iron ore port inventories in the coming weeks.

“China’s iron ore port stocks have increased since February, but last week marked the first decrease in China’s iron ore port stockpiles in nearly two months,” he said.

“With Vale’s production losses only now being felt by the seaborne market, we think an aggressive fall in port stocks over the coming weeks is on the cards. Tropical Cyclone Veronica’s impact on Australian iron ore exports will only exacerbate downside pressure on China’s port stocks.”

Dhar says Chinese stockpiles will be an important indicator as to whether the iron ore market is in surplus or deficit in the period ahead.

Pointing to the likelihood of a quiet end to the week, China will break for the Tomb Sweeping Holiday on Friday, an outcome that should see market activity slow to a crawl. Dalian iron ore futures will be closed until Monday.

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