Iron ore prices are climbing again

  • Iron ore prices resumed their rally on Thursday.
  • Mid and higher grades climbed to fresh multi-year highs.
  • The gains coincided with strength in Chinese steel futures during the session.
  • Iron ore and steel futures reversed those gains on Thursday evening, pointing to early weakness in physical markets on Friday.
  • Chinese trade data for March will be released during the session.

Iron ore prices resumed their climb on Thursday with strong gains seen across all major grades.

According to Metal Bulletin, the spot price for benchmark 62% fines rose 1.1% to $95.65 a tonne, leaving it at fresh five-year highs.

65% fines increased by 1% to $107.50 a tonne, the highest level since Metal Bulletin first produced daily spot movements for this grade in early 2016.

58% fine was the relative laggard for the session, lifting 0.5% to $79.29 a tonne. It sits just below the five-year high of $79.95 a tonne set earlier this week.

Iron ore futures in Dalian also rose on Thursday with the September 2018 contract lifting to 654.5 yuan, up from 648.5 yuan on Wednesday evening.

Gains in Chinese steel prices in Shanghai provided a tailwind for spot and futures markets during the session.

Rebar and hot-rolled coil futures on the Shanghai Futures Exchange rose to 3,808 and 3,703 yuan respectively, up from Wednesday’s night session close of 3,771 and 3,670 yuan.

“There’s not much news at the moment, but demand for iron ore is expected to continue rising, which should support prices,” a Shanghai-based trader told Reuters.

“I heard from some steel mills in northern China that they are increasing production. And, with the winter output restrictions having been lifted, we’ll see some more demand for iron ore in the near future.”

Firmer steel prices often helps to support iron ore demand, encouraging mills to ramp up production, especially during periods when profit margins are healthy.

“The positive outlook for steel demand has been boosted by relatively low inventories of steel in China,” analysts at ANZ Bank said in a note. “This has helped support iron ore prices amid supply issues the market has been experiencing.”

The bounce in spot and futures markets followed the release of Chinese producer price inflation data which revealed factory gate prices rose by 0.4% in the year to March, the first acceleration in the annual rate of change since June last year.

The gains in steel and iron ore markets did not extend to coking coal and coke futures in Dalian which slid to 1,312.5 and 2,012 yuan, down marginally from the prior night session close.

Hinting the gains in physical markets mat not extend into Friday’s trading session, all five contracts fell in overnight trade on Thursday.

SHFE Hot Rolled Coil ¥3,669 , -0.24%
SHFE Rebar ¥3,753 , -0.53%
DCE Iron Ore ¥649.00 , 0.00%
DCE Coking Coal ¥1,304.00 , -0.69%
DCE Coke ¥1,985.50 , -1.00%

Futures will reopen at 11am AEST, before the release of Chinese trade data for March that will include iron ore and coal imports along with steel exports.

There is no set release time for the trade report. It generally arrives after 1pm AEST based on historic trends.

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