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Iron ore prices jump as Chinese steel production ramps up

Business Insider Australia logo Business Insider Australia 14/03/2019 David Scutt
a person that is on fire: A steel worker at work in China. © Getty A steel worker at work in China.

    Iron ore prices rose across the board on Thursday, encouraged by signs of strengthening demand in China, the world's largest iron ore consumer.

    According to Metal Bulletin, the spot price for benchmark 62% fines jumped 2.9% to $87.26 a tonne, leaving it at a one-week high.

    Prices for higher grades also rallied with 65% fines lifting 2.2% to $98.20 a tonne.

    58% fines was the relative laggard, increasing by only 0.6% to a three-week high of $69.37 a tonne.

    a close up of a map © BI

    The surge in spot markets was mirrored by Chinese iron ore futures traded in Dalian.

    After finishing Wednesday's night session at 615.5 yuan, the May 2019 contract rose to as high as 623.5 yuan on Thursday before easing modestly into the close.

    Coking coal and coke contracts also climbed, lifting to as high as 1,242 and 2,016.5 yuan respectively, up from 1237.5 and 2,007 yuan on Wednesday evening.

    However, while bulk commodity contracts rallied, rebar and hot-rolled coil futures in Shanghai went backwards, dropping to as low as 3,762 and 3,703 yuan respectively, down from Wednesday's night session close of 3,802 and 3,743 yuan.

    The divergent price performance may have been explained by the release of Chinese industrial output figures for the first two months of the year, including Chinese steel production.

    According to China's National Bureau of Statistics (NBS), steel production surged to 149.58 million tonnes over January and February, up 9.2% on the same period a year earlier. The increase largely reflects that output restrictions on environmental grounds were not as strict this year as they were in 2018.

    Further boosting sentiment on the outlook for demand, Chinese fixed-asset investment in urban areas rose by 6.1% in January and February compared to the same period a year earlier, an acceleration on the 5.9% increase reported throughout 2018.

    Providing few clues as to what direction physical markets may move on Friday, Chinese bulk commodity and steel futures finished mixed in overnight trade on Thursday.

    Coking coal and rebar contracts rose modestly while coke and hot-rolled coil futures went backwards. Iron ore was near-unchanged.

    SHFE Hot Rolled Coil ¥3,677 , -1.32%

    SHFE Rebar ¥3,773 , -0.55%

    DCE Iron Ore ¥621.50 , 0.65%

    DCE Coking Coal ¥1,246.00 , 1.14%

    DCE Coke ¥1,990.00 , -0.48%

    Trade in Chinese commodity futures will resume at midday AEDT.

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