Iron ore's latest surge looks like it may have been one-off

Paul S. Howell/Liaison

Iron ore spot markets soared on Thursday, mirroring an even larger move in Chinese futures earlier in the session.

However, futures lost a bit of ground in overnight trade, suggesting that this latest surge may just have been a one-off.

According to Metal Bulletin, the spot price for benchmark 62% fines surged by 3.3% to $75.41 a tonne, reversing the losses seen over the previous three sessions.

Both higher and lower grades also rallied on Thursday.

58% fines rose by 2.8% to $50.39 a tonne while ore with 65% Fe content added 2.9% to $95.60 a tonne.

The sharp turnaround from the trend seen in the previous few sessions was driven by an enormous surge in Chinese commodity futures markets on Thursday.

They all ripped higher, be they base, bulk or steel futures.

“Rebar futures also experienced a sharp rebound on Wednesday night, and remained strong during the early hours of trading on Thursday before shedding some of the gains,” said Metal Bulletin. “Sellers took the chance to raise prices, which paid off and helped them achieve higher sales volumes.”

That likely helped support iron ore spot and futures markets yesterday given the relationship between the two.

However, after a flurry of speculative buying during Thursday’s day session, Chinese buyers retreated once again to the sidelines in overnight trade.

The most actively traded January 2018 iron ore contract in Dalian finished trade at 550.5 yuan, down from a high of 561.5 yuan stuck earlier in the session. Rebar futures also reversed earlier gains, closing at 3,809 yuan. It had been as high as 3,860 during the session.

SHFE Rebar ¥3,809 , 0.37%
DCE Iron Ore ¥550.50 , 1.10%
DCE Coking Coal ¥1,460.50 , 2.82%
DCE Coke ¥2,245.00 , 1.31%

Coking coal and coke futures also reversed, as did much of the gains achieved in base metals earlier in the day.

Trade in Chinese futures will resume at 11am AEST, 30 minutes before the release of Chinese new home price data for July.

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