Iron ore prices are surging

Jonathan Wood/Getty ImagesThe Quiksilver Pro 2002 which was held at Burleigh Heads, Gold Coast, Australia.
  • Iron ore prices continue to surge.
  • Optimism towards US-Sino trade negotiations was cited as the catalyst to spark the latest bout of buying.
  • China’s Q4 GDP report will be released today.

Iron ore spot markets continued to climb on Friday, hitting fresh multi-month or multi-year highs in the process.

According to Metal Bulletin, the price for benchmark 62% fines lifted 1.5% to $75.70 a tonne, leaving it at a two-month high.

Higher grade ore was also in demand with 65% Brazilian fines jumping 1.4% to $89.30 a tonne. It too sits at the highest level in two months.

The price of 58% fines rose by a smaller 0.5% to $51.79 a tonne, adding to the strong gains seen earlier in the week. It sits at the highest level in 17-months.

From November 26 last year, prices for 58%, 62% and 65% fines have risen 30.4%, 17.8% and 10.3% respectively.

The across the board gains coincided with strength in Chinese steel futures in Shanghai.

The most actively-traded May 2019 rebar contract jumped to 3,628 yuan, up from 3,590 yuan on Thursday evening. Hot-rolled coil futures also rallied, finishing at 3,525 yuan, up from Thursday’s night session close of 3,493 yuan.

Those moves helped to spur on buying in bulk commodity contracts traded separately in Dalian.

Iron ore, coking coal and coke finished at 525, 1,239.5 and 2,066 yuan respectively, adding to gains seen on Thursday evening.

“Steel futures in China rose on reports that the key steel hub of Tangshan is tightening environmental curbs,” said commodity strategists at ANZ Bank.

“The Chinese province plans to restrict sintering by between 30% and 100% to tackle pollution. Prices were also supported by continued falls in steel inventories, which are now are record low levels in China.”

Renewed optimism over the prospect of a breakthrough in US-Sino trade negotiations may also have been a factor, sparked by reports that US officials were considering rolling back tariffs on Chinese imports entering the country. The same report, despite being dismissed by a treasury spokesperson later in the day, helped to fuel strong gains in Chinese stocks on Friday.

Hinting that there may be further upside to come in spot markets on Monday, Chinese steel and iron ore futures extended those gains in overnight trade on Friday.

Here’s the closing scoreboard.

SHFE Hot Rolled Coil ¥3,534 , 1.17%
SHFE Rebar ¥3,669 , 2.03%
DCE Iron Ore ¥536.50 , 2.88%
DCE Coking Coal ¥1,236.00 , -0.08%
DCE Coke ¥2,062.50 , 0.44%

The strength may have been helped by a separate report from Bloomberg that suggested China may ramp up buying in US goods over the next six years in an attempt to reduce its trade surplus with the nation to zero. The offer was apparently made during talks between the two sides earlier this month.

Trade in Chinese futures will resume at midday AEDT, an hour before the release of major Chinese economic data, including Q4 GDP.

From a year earlier, GDP is expected to expand by 6.4%, down from 6.5% in the year to September. The government’s growth goal for the year was an increase of around 6.5%.

If recent form is any guide, separate monthly readings on industrial output, retail sales and urban fixed asset investment could actually prove to be more influential on markets than the GDP report itself.

Compared to December 2017, industrial output and retail sales are expected to increase by 5.3% and 8.2% respectively. In 2018, urban fixed asst investment is seen growing by 6%, up from 5.9% between January to November compared to the same period in 2017.

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