Iron Ore Surges Amid Coal’s Record Rally, Lifting Miners’ Sharesby
Benchmark in Qingdao advance to the highest level since April
Dalian futures post longest run of daily increases since 2013
Iron ore is rallying as coal prices surge, lifting the shares of producers in Australia, the world’s largest shipper. The benchmark spot price in China posted the biggest weekly increase since April after rising for the fourth day in five on Friday.
Ore with 62 percent content rose 1.5 percent to $63.96 a dry ton in Qingdao, the highest price since April, according to Metal Bulletin Ltd. Earlier in Asia, futures in Dalian rose for a seventh day, the longest run since 2013, as Singapore’s SGX AsiaClear most-active contract surged for a third week.
After three years of slumping prices as low-cost mine supply rose and China slowed, iron ore has surged in 2016 as Asia’s top economy boosted stimulus, supporting steel demand. Fortescue Metals Group Ltd.’s Chief Executive Officer Nev Power told reporters this week that the Perth-based company expected prices to hold firm in 2017. Recent advances in iron ore have been supported by gains in coal after a supply crunch in China.
“The price of coking coal continues to rise,” supporting iron ore, said Zhao Chaoyue, an analyst at China Merchants Futures Co. in Shenzhen. Coking coal, or metallurgical coal, has more than doubled this year, with futures in Dalian hitting a record on Wednesday. Prices rose Friday after sinking a day earlier.
In Sydney, Fortescue shares have almost trebled in 2016 as iron ore recovered, and the company cut costs and repaid debt. The stock gained 7.6 percent this week, while Rio Tinto Group climbed 5.5 percent. Smaller miners have benefited too, with penny stock Atlas Iron Ltd. up 18 percent.
China’s crude-steel output climbed 3.9 percent to 68.17 million tons in September from a year ago, according to the statistics bureau. Production rose 0.4 percent in the first nine months, bucking widespread predictions at the start of 2016 that output would post a significant drop this year.
“Iron ore prices are defying market expectations, due almost exclusively to Chinese steel production continuing to exceed forecasts,” said Gavin Wendt, founding director & senior resource analyst at MineLife Pty in Sydney. “Coking coal prices are also a factor.”