After three consecutive declines, including a nasty 3.5% plunge on Thursday, the benchmark spot iron ore price sprung higher on Friday, closing the week nestled above the $60 a tonne level.
According to Metal Bulletin, it rose by 2.1% to $60.74 a tonne, leaving its gain for the week at 2.3%.
Year to date it has gained 39.4%.
Perhaps explaining the sudden spike, a story in the People’s Daily newspaper, a Chinese state-run publication, stated that the government’s planned capacity cuts in the nation’s steel and coal industries was not going to plan.
“China has achieved only 47% of its targeted crude steel capacity cuts of 45 million tpy for 2016 during the January-July period, which means its progress is not going as planned, state newspaper People’s Daily reported on Friday,” said analysts at Metal Bulletin.
“The slow and uneven progress across the country has led an inter-ministerial joint inspection team — formed earlier this year to address overcapacity in the steel and coal industries — to plan spot checks around the country starting in the middle of August.”
The news was interpreted by markets to be bullish for steel prices given it would reduce steel industry capacity. This, in turn, helped to drive steel’s input components higher as well, including iron ore.
It’s hardly “new” news.
Old habits die hard in the iron ore market, it seems. Movements in steel prices, as has been the case over the first half of the year, continue to drive those in the iron ore spot and futures markets. They are almost always driven by speculation, too, as anyone who follows it closely can attest.
Suggesting that the rebound in the spot iron ore price may continue on Monday, Chinese iron ore futures closed higher on Friday evening.
The most actively traded September 2016 contract finished the session at 492 yuan, up 1.13% from the previous close. There were similar gains recorded in Chinese rebar and coking coal futures.
Trade in Chinese commodity futures will resume at 11am, just two hours before the Chinese government will release international trade figures for July around 1pm AEST.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.