Iron ore boosts higher following increase in Chinese futures

Iron ore spot markets saw an impressive run on Thursday, climbing highest in more than a month. With this, the benchmark price is over US$90 (AU$117.05) a tonne, helped largely by an escalation in Chinese futures.

As noted by Metal Bulletin, the spot price for benchmark 62 percent fines increased by 3.2 percent to US$90.93 (AU$118.26) a tonne. It is the first time since Mar. 3 that the steel making ingredient has crossed the US$90 (AU$117.05) threshold.

The number has jumped 15.3 percent this year, which comes on the back of an 81 percent gain seen in 2016. At the same time, higher and lower grades both experienced gains. The price for 58 percent fines soared by as much as 3.6 percent to settle at US$62.6 (AU$81.42).

In January and February this year, the industrial production led by the construction industry has climbed 6.3 percent, according to the Statistics Bureau of China. Fixed asset investment surged by a margin of 8.9 percent, in comparison to last year’s increase of 8.1 percent. The enhancement was largely attributable to high private sector investment.

The price for iron ore has climbed 16 percent this year, on the back of an 85 percent rise last year. Since it hit its lowest in nearly a decade at the end of 2015, the price has increased by more than double. China dominates the seaborne iron ore market, worth 1.3 billion tonne, and manufactures as much steel as the entire world.

The surge in prices came on the heels of winding down of iron ore futures trading fees by the Dalian Commodities Exchange – an attempt to enhance the institutional involvement in the market. “A bullish day on the iron ore futures resulted in a 5.46 percent jump on the most active contract, while rebar futures rose 1.56 percent,” analysts at The Steel Index said. “Sellers of spot ore dramatically hiked their offers, with bids following.”

The iron ore futures for May 2017 added 2.25 percent, reaching 726 yuan (AU$136.62). The number recorded at the close of Monday’s day session was 724.5 yuan (AU$136.24).

Rises in other contracts were comparatively lesser, largely due to the slash in trading fees being a significant contributor for the surge in iron ore prices. The most actively traded rebar contract increased 0.66 percent to 3,653 yuan. Coking coal and coke futures closed with mixed results.

According to the trade figures released last week, China imported 83.5 million tonnes of iron ore in February – an increase of 13 percent as compared to 2016. Meanwhile, the total imports for the first two months of 2017 experienced a jump of 12.6 percent to reach 175.3 million.