Iron ore is back above $70 a tonne, following the lead provided by Chinese futures that finished limit up 6% for a second consecutive session on Thursday.
According to Metal Bulletin, the spot price for benchmark 62% fines surged 8.78%, or $5.69, to $70.46 a tonne, extending this year’s gain to 61.7%. In percentage terms, the gain was the third largest since spot pricing first began in May 2009.
Since December 11 last year, the benchmark price has surged by an unbelievable 84%. The price now sits at the highest level seen since January 9, 2015.
The enormous gain follows another frenetic day of trade in Chinese futures with the most actively traded September 2016 contract on the Dalian Commodites Exchange closing Wednesday’s day session limit up 6% at 474 yuan.
Separately, rebar futures on the Shanghai Futures Exchange went even further, closing up 7.38% at 2,750 yuan — no mean feat given the contract is only permitted to rise by a maximum 6% according to exchange rules.
As key ingredients in the steel making process, strength in China’s physical steel market has contributed to the enormous rally in iron ore and coking coal seen in recent months.
Combined with lower iron ore production forecasts from major miners such as BHP Billiton and Rio Tinto, along with an upcoming government enforced curtailment of steel production in the Chinese city of Tangshan, the iron ore price has rocketed higher in response, bucking downbeat forecasts offered by many analysts earlier in the year.
According to data released by the the World Steel Association earlier this week, Chinese steel production — accounting for around half of total global output — jumped by 20.9% to 70.7 million tonnes in March, underlining the sharp lift in construction-related demand that’s underpinned iron ore’s rally.
In overnight trade on Thursday evening, iron ore futures on the Dalian Commodities Exchange continued to push higher, finishing the session up a further 1.72% at 472.5 yuan.
If sustained or built upon during Friday’s day session — beginning at 11am AEST — it points to the likelihood of a further gain in the spot price when Metal Bulletin release updated pricing at 8.30pm AEST.