Iron Ore Storms Higher as Futures Top Close During April’s Boom

  • Commodity ‘has seen an interesting demand change,’ IG says
  • China’s steel mills notched record daily production in June

Bruised in 2013, beaten in 2014 and then battered in 2015, iron ore is now battling back. Futures in China surged on Monday above the closing high seen during the height of a speculative boom in April as factory gauges signaled stimulus continues to bolster manufacturing in the top producer.

The September contract jumped 5.5 percent to 486.5 yuan ($73) a metric ton on the Dalian Commodity Exchange, topping the April close of 474 yuan to end at the highest level since February 2015. In Singapore, SGX AsiaClear futures for September rose 6.1 percent to $58.86 a ton. The benchmark price for spot iron ore rallied 4.9 percent.

The steel-making ingredient is recovering ground lost since May, after a speculator-led boom that drew global attention fizzled. Chinese mills have maintained daily steel output at record levels, boosting demand for iron ore even as supply has remained strong. Sanford C. Bernstein & Co. has said the raw material may be boosted over the next 12 months as expanded credit in China helps to underpin steel production.

“Iron ore has seen an interesting demand change over the past three months,” said Evan Lucas, a markets strategist in Melbourne at IG Ltd., adding that demand for steel products is likely to remain high over the coming months. “The PMI data today suggests that China is yet to see any moderation in its infrastructure spending.”

Industrial Strength

The manufacturing purchasing managers index from Caixin Media and Markit Economics jumped to 50.6 in July, from 48.6 in June, while the official PMI slipped slightly to 49.9, from 50, presenting a broadly positive readout of China’s industrial strength. Numbers below 50 indicate deteriorating conditions. The country makes half the world’s steel.

Spot ore with 62 percent content at Qingdao was at $62.27 a ton on Monday, according to Metal Bulletin Ltd. The benchmark has advanced 43 percent this year, topping $70 in April, after a three-year losing run that included a 39 percent loss in 2015 and 47 percent retreat in 2014 as global supply exceeded demand.

Not everyone is convinced by the recent resurgence. Macquarie Group Ltd. has said it’s skeptical about fundamental support for the move higher, asking in a note last month whether prices were getting carried away again. China Merchants Futures Co. has also flagged concern about rising port stockpiles.

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