After a pausing to catch its breath on Friday, the iron ore rally resumed with gusto on Monday, powering to yet another multi-month high.
According to Metal Bulletin, the spot price for benchmark 62% fines surged by 4.88% to $62.27 a tonne, leaving it sitting at the highest level seen since May 3.
From June 2 the benchmark price has jumped by 29.2%, extending the gains so far this year to an enormous 42.9%.
Keeping with the familiar pattern, analysts at Metal Bulletin put the gain down to renewed strength in Chinese steel prices.
“Improving steel prices have led to a strong rise in iron ore prices,” said Metal Bulletin. “Three major Chinese steelmakers released their financial reports for the first half of 2016 over the weekend. One of them saw its profits quadruple while the other two returned to the black.”
Alongside signs of improved profitability, Metal Bulletin notes that a bullish China steel industry PMI report for July may have also contributed to the price gains in steel and its associated inputs.
The PMI came in at 50.2, well above the 45.1 level seen in June. All of the survey’s components expanded during the month with the strongest performance coming from new exports orders which surged to 55.7, well above the 51.3 level seen in June. Domestic orders also rebounded, rising to 50.5 from 43.3.
Immediately following the release of the report, Chinese iron ore futures traded on the Dalian Commodity Exchange took flight, eventually closing the session up 3.95%. This likely contributed to the surge in the spot iron ore price seen on Monday.
In overnight trade, Dalian futures have trimmed their initial gains, closing the night session up 2.86% at 486 yuan.
Chinese commodity futures will resume trade at 11am AEST.