- Iron ore spot markets jumped for a second consecutive session on Monday, mirroring a large gain in Chinese futures.
- Analysts put the rebound down to speculation over strengthening demand and weakening supply for steel product.
- Chinese futures rallied strongly in overnight trade.
Iron ore spot markets jumped for a second straight session on Monday, continuing to recover after falling into a technical bear market late last week.
According to Metal Bulletin, the price for benchmark 62% fines rose 1.2% to $65.80 a tonne, adding to the 3% gain recorded on Thursday.
At 4.2%, the two-day gain is the largest in percentage terms since late December 2017.
Both higher and lower grade ores also rallied during the session.
Ore with 65% Fe content soared 2.5% to $83.10 a tonne, outpacing a 1.3% lift in the price of 58% fines which settled at $37.99 a tonne.
The moves in spot markets followed a wild session in Chinese commodity futures on Monday with many steel and bulk commodity contracts screeching higher in early trade before reversing hard in the latter parts of the session.
The May 2018 rebar contract in Shanghai closed up 0.6% at 3,344 yuan a tonne, giving up an earlier gain of as much as 4.7%.
Analysts put the rebound down to a combination of speculation over strengthening demand for steel product from China’s construction sector and news of further steel production curbs in the Chinese province of Hebei.
“I believe demand will pick up from the first half of April as the construction season gets underway so consumption of steel products will increase,” a Beijing-based trader told Reuters.
News that steel mills in Handan, a northern city in China’s Hebei province, have been ordered to cut production levels by around 25% from April 1 to mid-November helped to support not only rebar contracts but also those for iron ore, coking coal and coke on Monday.
Iron ore and coking coal futures in Dalian closed up 1.9% apiece at 446.5 yuan and 1,281 yuan a tonne respectively, giving back much of the gains achieved earlier in the session.
Coke futures had an even wilder ride on Monday, finishing the session up 3.1% at 1,848 yuan a tonne having been up 7.6% at one point in early trade.
Along with speculation over demand and steel supply, all four commodities had been pulverised in March, hinting that some of the recent gains have been fuelled by short covering from traders.
After giving back much of their earlier gains in Monday’s day session, all four contracts did another about-face in overnight trade, ripping higher across the board.
SHFE Rebar ¥3,652 , 1.61%
DCE Iron Ore ¥452.00 , 0.89%
DCE Coking Coal ¥1,294.00 , 0.47%
DCE Coke ¥1,875.50 , 0.59%
Although recent moves in futures have been wild, it suggests spot markets may continue to push higher should futures hold or add to those gains today.
Trade in Chinese commodity futures will resume at 11am AEST.