As quickly as it began, the selloff in Chinese iron ore and rebar futures is over, replaced by yet another surge today.
Here’s the scoreboard at the mid-session break on Friday.
SHFE Rebar ¥4,023 , 4.47%
DCE Iron Ore ¥580.50 , 3.85%
DCE Coking Coal ¥1,440.00 , 2.06%
DCE Coke ¥2,361.50 , 1.01%
The numbers speak for themselves.
Another ballistic rally, replacing the rout seen in the early parts of the week.
The January 2018 rebar contract on the Shanghai Futures Exchange has surged 4.47% to 4,023 yuan, leaving it within touching distance of a fresh four-year high.
That’s dragging iron ore futures higher with the January 2018 contract on the Dalian Commodities Exchange jumping by 3.85% to 580.5 yuan, extending its rally from Wednesday’s low to close to 7%.
The latest rebound follows a raft of bullish Chinese economic data released in recent days.
On Thursday, the China’s steel industry PMI hit the highest level in 16 months in August, underpinned by huge increases in production and new orders. Adding to optimism, the separate Caixin-Markit manufacturing PMI rebounded to a six-month high over the same period, underpinned by export sales which grew at the fastest pace in seven years.
While speculators have driven the latest buying frenzy, Vivek Dhar, mining and energy at the Commonwealth Bank, says that fundamentals continue to drive the longer-term price action.
“Prices continue to be driven by demand factors in China, but a falling US dollar has also contributed significantly to the pick-up,” he says. “As long as steel margins remain elevated, the incentive for steel mills is to purchase iron ore to boost steel production in the short-term.”