Iron ore prices rip higher again

Don Arnold/WireImage/Getty
  • Iron ore spot markets jumped again on Tuesday.
  • Mid and higher grades are now within touching distance of hitting the highs set earlier this year. Lower grades jumped to the highest level since 2014.
  • Dalian iron ore futures closed at a record high on Tuesday. That move was extended during the night session.
  • Chinese steel futures rose again in overnight trade on Tuesday. Combined with the move in iron ore contracts, it points to further strength in physical iron ore markets on Wednesday.
  • The Caixin-IHS Markit Services PMI for March will be released during Wednesday’s session.

The iron ore rally keeps on keeping on with strong gains recorded across all major grades on Tuesday.

And with Chinese futures continuing to rip higher, it looks like there may be more further upside to come on Wednesday.

According to Metal Bulletin, the spot for benchmark 62% fines jumped by 1.4% to $89.89 a tonne, extending the rally seen over the past three sessions to 6.2%.

It now sits just below the multi-year high of $90.58 a tonne set in early February this year.

The move in the benchmark was mirrored across lower and higher grades during the session.

65% fines also rose by 1.4% to $102.40 a tonne. It too sits just below the high of $103.30 set earlier this year. After soaring to the highest level since August 2014 on Monday, 58% fines went on with the move on Wednesday, lifting by a further 1.6% to $75.07 a tonne.

The move in physical markets was mirrored in Chinese futures which hit the highest level on record, according to analysis from Reuters.

The May 2019 iron ore contract hit a session high of 665.5 yuan in late trade, surpassing the previous record set in early February this year. It eventually finished at 662.5 yuan, the highest close since trade in Chinese iron ore futures began in 2013.

Along with supply disruptions in Brazil and Australia, the move in both futures and physical iron ore markets was also helped by firmer steel futures in Shanghai.

The most actively traded rebar and hot rolled coil contracts rose to 3,838 and 3,771 yuan respectively, up from 3,793 and 3,750 yuan on Monday evening.

Reports that steel mills in Tangshan and Handan, China’s largest steel production hubs, have been ordered to curb production in the June quarter to help improve air quality was cited as one catalyst behind the move.

While steel and iron ore futures rose strongly, coking coal and coke contracts eased fractionally, finishing the session at 1,237.5 and 2,004.5 yuan respectively.

Hinting the rally in physical iron ore markets may continue into Wednesday’s trading session, iron ore and steel futures jumped again in overnight trade on Tuesday.

SHFE Hot Rolled Coil ¥3,810 , 1.20%
SHFE Rebar ¥3,866 , 1.23%
DCE Iron Ore ¥674.00 , 2.82%
DCE Coking Coal ¥1,242.00 , 0.08%
DCE Coke ¥2,015.00 , 0.12%

Trade in Chinese commodity futures will resume at midday AEDT, 45 minutes before the release of the Caixin-IHS China Services PMI for March.

Despite the name, this report covers activity levels across China’s non-manufacturing sectors, including the all-important construction sector.

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