Iron ore prices surged on Monday, but it was driven by temporary factors

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Iron ore spot markets soared on Monday, mirroring an even larger surge in Chinese futures.

But it was driven by temporary factors, creating some doubt at to whether the rebound will last.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped by 2% to $92.33 a tonne, partially reversing the three-day, 4.6% drop seen late last week.

It’s now rallied 17.1% in 2017.

Higher and lower grades rose by a similar margin to the benchmark price.

Analysts at Metal Bulletin pinned the rebound on temporary supply disruptions in northern China, something that has helped to underpin steel and iron ore prices in the past.

“China’s spot rebar prices rose sharply on Monday following the sharp uptick in the futures market,” the group wrote on Monday.

“Futures soared on reports that steel, iron ore and coking coal producers have been ordered to cut output by provincial authorities in Hebei due to high pollution levels, leading to an increase in buying interest in the spot market.”

Perhaps reflecting that is unlikely to impact markets over the medium to longer term, Chinese futures did little in overnight trade, suggesting the momentum in spot markets may not last.

The May 2017 iron ore future on the Dalian Commodities Exchange finished at 714.5 yuan, up 0.56% and largely unchanged from Monday’s day session close. It traded to as high 732.5 during the day session.

It was a similar story for rebar futures on the Shanghai Futures Exchange which closed up 0.53% at 3,592 yuan. That too was well below the high struck during Monday’s day session.

Here’s the final scoreboard from overnight:

SHFE Copper ¥48,100 , 0.04%
SHFE Aluminium ¥13,890 , -0.04%
SHFE Zinc ¥22,915 , -0.04%
SHFE Nickel ¥91,330 , 1.23%
SHFE Rebar ¥3,592 , 0.53%
DCE Iron Ore ¥714.50 , 0.56%
DCE Coking Coal ¥1,265.00 , -0.55%
DCE Coke ¥1,739.50 , 0.64%

Trade in Chinese commodity futures will resume at midday AEDT.

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