In line with Chinese iron ore futures which closed limit up 4%, the spot iron ore price has jumped spectacularly overnight.
According to Metal Bulletin the spot price for 62% fines rose by $2.44, or 4.57%, to $55.89 a tonne on Wednesday.
The gain, the largest in percentage terms since July 9, leaves the price of benchmark ore at the highest level seen since the beginning of the month.
While still down for the month, from the record low level of $44.59 struck on July 8, the price has now risen by a dizzying 25.3%.
While the spot price is soaring, there may be factors driving prices higher which, if true, may only be temporary in nature.
Here’s a snippet from Metal Bulletin’s Wednesday report.
“China’s steel industry rumour mill has been in overdrive the past few days amid talk that Beijing is ordering steel makers from surrounding regions to cut production ahead of a key event in the capital. Beijing has ordered a stop on all construction activity in the capital ahead of a military parade which marks the 70th anniversary of the end of World War II on September 3.
The rumour could not be confirmed, but since the weekend the talk from local media and market participants is that the clean air policy has now been extended to steel mills in neighbouring areas, and that these will be required to stop or limit production in the period leading up to the spectacle. Mills located within 100 km around the capital are required to halt all production activities; those within 100-200 km have to cut their output by 50%. Steel makers located between 200 and 500 km away need to reduce production by one third”.
Indicating that the rally in the spot price may continue this evening, Chinese iron ore futures jumped again overnight with the most actively traded January 2016 contract on the Dalian commodities exchange rising 5.5 yuan, or 1.50%, to 371.5 yuan.