Spot iron ore stretched gains to hit fresh three-month highs as firmer Chinese steel prices encouraged producers to stock up on the raw material that has outperformed other industrial commodities so far this year.
Firmer iron ore futures on Wednesday suggest further gains in spot benchmark prices that have already gained more than 7 percent so far this year. In contrast, copper has lost 3 percent and Brent crude has fallen almost 13 percent. “I think there’s some restocking to be done. Steel prices are firm, steel market looks good.
It’s not a very big surprise to me,” a Shanghai-based iron ore trader said on the strength on the iron ore market. Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI climbed 1.1 percent to $46.10 a tonne on Tuesday, the highest since Nov. 16, according to The Steel Index (TSI) which assesses prices.
Iron ore rallied 5.6 percent on Monday, its biggest single-day jump since July last year. As the number of Chinese players returning to the market from last week’s Lunar New Year holiday increased, so did fresh buying activity, TSI said, prompting sellers to raise offers for spot cargoes.
The most-traded May iron ore on the Dalian Commodity Exchange touched a four-month high of 343.50 yuan ($52.65) a tonne on Wednesday, and was up 0.2 percent at 339.50 yuan by 0328 GMT. On the Singapore Exchange, May iron ore rose 1 percent to $41.70 a tonne. On the Shanghai Futures Exchange, construction-used rebar was off 0.6 percent at 1,860 yuan a tonne, not far below Monday’s 4-1/2-month peak of 1,880 yuan. Iron ore could face resistance as the price nears $50 a tonne, the Shanghai trader said. “We have to realise one thing – ultimately supply is going to overwhelm everything,” he said.
Amid excess global supply and slower demand from China, iron ore prices have tumbled more than 60 percent in the past two years.
ANZ Bank said increasing supply from Brazil – the world’s No. 2 iron ore supplier after Australia – “is flattening the global cost curve for iron ore, putting downward pressure on the longer term, sustainable price”.