Iron ore markets are as jumpy as a cat on a hot tin roof

Education Images/UIG via Getty ImagesA cat, mimicking iron ore markets.
  • Iron ore markets rallied on Wednesday, helped by reports that policymakers are looking to shutter hundreds of Chinese iron ore mines.
  • The benchmark iron ore price has moved in the opposite direction to the day before in each of the past five sessions.
  • Dalian iron ore futures continued to rally in overnight trade.

Iron ore markets are as jumpy as a cat on a hot tin roof, maintaining the yo-yo price action seen over the past week.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped by 1.3% to $66.34 a tonne, leaving it at the highest level since May 24.

As seen in the chart below, the benchmark has moved in the opposite direction to the day before in each of the past five sessions.

Like the benchmark, higher grades also pushed higher on Wednesday with the price for 65% fines lifting 0.8% to $38.51 a tonne.

Lower grades, however, failed to participate in the rally, holding steady at $38.51 a tonne.

The lack of movement in lower grades may reflect that Chinese iron ore port inventories hit the highest level on record last week, the vast majority comprising cheaper, less efficient grades.

Analysts put the strength in mid and higher grades down to reports that authorities plan to shut hundreds of Chinese iron ore mines.

According to Reuters, the Chinese city of Tangshan said it will close 226 mining firms — half iron ore miners — that do not have legitimate licenses as part of efforts to curb illegal mining and cut pollution.

There were also reports that the Chinese government has sent teams of inspectors to 10 regions to check on progress in reducing environmental damage following previous pledges by local authorities.

“The inspections may affect some iron ore output, which will help ease oversupply pressure in the market,” analysts at Founder CIFCO Futures said in a note.

Whether the catalyst or not, Chinese iron ore futures rallied in Dalian on Wednesday, adding to the modest gains seen late on Tuesday.

The September 2018 contract finished the session at 467 yuan, up from Tuesday’s night session close of 463 yuan.

Rebar futures in Shanghai also managed to claw back earlier losses, climbing from 3,708 yuan to close at 3,736 yuan.

Both contracts extended those gains during Wednesday’s night session.

Here’s the final scoreboard.

SHFE Rebar ¥3,742 , 1.00%
DCE Iron Ore ¥472.00 , 2.16%
DCE Coking Coal ¥1,246.00 , 0.89%
DCE Coke ¥2,049.00 , 1.59%

The modest gains suggest iron ore spot markets may follow suit today.

Chinese commodity futures will resume trade at 11am AEST.

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