The iron ore rally rolls on as Chinese futures hit a 5-month high

Photo by S. R. Gaiger / Topical Press Agency / Hulton Archive / Getty Images

Chinese iron ore futures continued to rip higher overnight, closing Monday’s night session at a fresh multi-month high.

Here’s the final scoreboard:

SHFE Rebar ¥3,961 , 1.23%
DCE Iron Ore ¥603.50 , 3.78%
DCE Coking Coal ¥1,478.50 , 0.37%
DCE Coke ¥2,337.00 , 3.18%

At 603.5 yuan per tonne, the January 2018 iron ore contract in Dalian added another 3.78%, finishing the session at the highest level since March 17.

It has now rallied 48.3% from mid-June, including a 16.5% surge in just the past four trading sessions.

The overnight close was also above the 596 yuan a tonne level it finished Monday’s day session.

On Friday the Dalian Commodities Exchange announced that a limit on daily purchases of January and February 2018 iron ore contracts of 6,000 lots would be introduced on Tuesday. Some believe this may have contributed to speculative buying in recent days.

Dalian January 2018 Iron Ore Daily Chart. Source: Thomson Reuters

With the benchmark spot price sitting just under $80 a tonne, it suggests this level could be breached today should futures maintain or build upon the overnight gains.

Helping to fuel the iron ore rally, rebar futures traded separately on the Shanghai Futures Exchange finished at 3,961 yuan, almost unchanged from Monday’s day session close.

Both coking coal and coke futures also finished higher, underlining the boost stronger steel prices are delivering to its raw inputs.

Burgeoning production margins and strong demand is boosting confidence that Chinese steel mills will lift output in the period ahead, increasing demand for iron ore and coking coal as a consequence.

Trade in Chinese commodity futures will resume at 11am AEST.

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