After last week’s wild action that saw the price jump nearly 20% in a day only to give it all back over the next six trading sessions, there’s renewed signs of life in the iron ore rally.
According to Metal Bulletin, the spot price for 62% fines leapt by 4.7%, or, $2.52, to $56.09 a tonne on Thursday, extending the gains for 2016 to 28.7%.
The one-year chart below reveals the recent lift in volatility, even by usual standards.
Suggesting that the bullish momentum of the past two days may continue on Friday, Chinese iron ore futures exploded higher in overnight trade, suggesting that another significant gain in the spot price may arrive this evening.
The most actively traded May 2016 contract on the Dalian Commodities Exchange jumped by 5.75% to 450.5 yuan, leaving it close to the 6% “limit up” level that prevents it from moving any higher over any one trading session.
The last time such a substantial gain was recorded was when the spot price jumped by $9.99 on Monday last week, the largest one-day gain on record.
Rebar futures on the Shanghai Futures Exchange also rose strongly, soaring by 3.43% to 2,172 yuan.
Given the price action in futures, if sustained today, another eye-watering gain may arrive in the spot price tonight.
Perhaps explaining the enormous move seen on Thursday, Brazilian iron ore giant Vale warned yesterday that it could lose as much as 100 million tonnes of annual output in the southeastern state of Minas Gerais over the next three years due to pending environmental licenses.
In an email to Reuters, the miner stated that licenses for 88 projects were still being analyzed, and that if they were not approved it would halve Vale’s output in the state.
Production cuts could come as soon as the next few months, the company warned.
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