Iron ore spot markets popped higher on Tuesday mirroring a rally in Chinese futures.
According to Metal Bulletin, the price for benchmark 62% fines rose 2.5% to $76.37 a tonne, it largest one-day rally since the end of August.
Ore with 65% Fe content also bounced, rising 1.4% to $99.50 a tonne.
However, lower grades bucked the trend with the price for 58% fines slipping 0.1% to $46.87 a tonne.
The divergence between reflected Chinese steel mill demand for seaborne cargoes rather than existing port inventories of lower grade ores, said Platts.
“China’s steel mills are opting to buy higher grade iron ore cargoes domestically and from the seaborne import market over readily-available mostly medium and lower grade port stocks as this is proving more economical amid high steel prices,” the group said.
Chinese iron ore port inventories — largely comprising less-efficient lower grade ores — currently stands at 133 million tonnes, according to data from Shanghai Steelhome, remaining at elevated levels despite falling from 141.45 million tonnes in mid-June.
This time a year ago, port inventories stood at 103.1 million tonnes.
The jump in higher grades followed a late flurry of buying in Chinese iron ore and rebar futures during Tuesday’s day session with both contracts closing near session highs.
Iron ore futures in Dalian added 3.4% to 548 yuan per tonne while rebar futures in Shanghai rose 1.49% to 3,959 yuan per tonne.
And, as seen in the table below, those gains were sustained during Tuesday’s night session.
SHFE Rebar ¥3,955 , 0.82%
DCE Iron Ore ¥548.50 , 2.33%
DCE Coking Coal ¥1,457.50 , 0.07%
DCE Coke ¥2,457.00 , 0.63%
Trade in Chinese commodity futures will resume at 11am AEST.