Money Iron ore is ripping higher as China clamps down on steel production

19:54  09 january  2018
19:54  09 january  2018 Source:   Business Insider Australia

Iron ore is closing in on $80 a tonne

  Iron ore is closing in on $80 a tonne Iron ore spot markets rallied on Thursday, hitting the highest level in close to five months. Iron ore spot markets rallied on Thursday, hitting the highest level in close to five months.

And with Chinese iron ore futures screeching higher in overnight trade, it looks like there may be further gains to come. “The statement raised market expectations that China will act to restrict new steel production capacity to be built,” an unnamed steel trader in Shanghai told Reuters.

China , unlike the rest of the world, reports its iron ore volumes in gross terms; it does not adjust for declining iron content within its production . We can calculate the iron content of Chinese iron ore by taking total steel production , working out the iron ore needed

person flying through the air while riding skis© Provided by Business Insider Inc

Iron ore spot markets made it five gains on the trot on Monday, leaving the benchmark price at a fresh multi-month high.

And with Chinese iron ore futures screeching higher in overnight trade, it looks like there may be further gains to come.

According to Metal Bulletin, the price for benchmark 62% fines rose 1.2% to $77.74 a tonne, leaving it at the highest level since September 5, 2017.

It's made a perfect start to 2018, adding an impressive 7.1%.

a screenshot of a cell phone© Provided by Business Insider Inc

The strength in the benchmark was mirrored across the grades, albeit to a lesser margin.

The price for 58% fines added 0.6% to $42.58 a tonne. Ore with 65% Fe content rose by a smaller 0.2%, settling at 92.80 a tonne.

Iron ore got whacked again to start the week

  Iron ore got whacked again to start the week Iron ore spot markets fell heavily for a second consecutive session on Monday, weighed down by another steep increase in Chinese inventories. According to Metal Bulletin, the price for benchmark 62% fines fell 1.9% to $76.59 a tonne, adding to the 1.3% drop seen on Friday. It was the largest one-day percentage decline since December 27 last year.© Provided by Business Insider Inc As was the case on Friday, the weakness in the benchmark was replicated across the grades.Ore with 65% Fe content slid 1.6% to $92 a tonne while the price of 58% fines fell by a smaller 1.5% to $41.82 a tonne.

China halts oil product exports to North Korea in November as sanctions bite. China 's aggressive campaign to clean its skies by clamping down on polluting steel mills has fuelled a need for high -grade iron ore .

Iron ore ; steel ; aluminium; and oil. -Large iron ore oversupply looms but will prices head to US/t? Along with higher imports China 's domestic iron ore production is also picking up.

As is often the case, the strength in futures coincided with a late rally in Chinese rebar and iron ore futures on Monday.

The May 2018 rebar contract in Shanghai rose 0.7% to 3,818 yuan a tonne, recovering from losses seen earlier in the session. It was a similar story for iron ore futures in Dalian with the May 2018 contract rallying 3.0% to 555.5 yuan a tonne, leaving it at the highest level since early September last year.

The gains followed the release of new guidelines from Chinese regulators restricting the replacement of obsolete steel mill capacity.

According to Reuters, China’s Industry and Information Technology Ministry said it would allow one tonne of new capacity to be built for each 1.25 tonnes closed in key regions in the period ahead, an outcome that acted to support steel prices in the later parts of the session.

Here are the breakeven rates for major iron ore miners

  Here are the breakeven rates for major iron ore miners For those looking to buy or sell shares in a listed iron ore miner, this table from Macquarie Bank may be of some interest. It shows the current breakeven levels for various iron ore miners, along with the annual volumes each produce and the average quality of the ore they mine. © Provided by Business Insider Inc Macquarie says it used the average for spot freight and exchange rates over the December quarter last year in order to calculate individual firms breakeven level.

Iron ore 's latest rally comes after Shanghai rebar futures – the world's most traded steel contract – jumped to the highest level since end-2013 on Tuesday according to Reuters. Authorities are also clamping down on pollution from sintering plants, a necessary extra step when using low grade ore

Despite the relatively subdued production of steel , China ’s demand for resources has been strong and this is reflected in higher prices for iron ore and coking coal, which have contributed significantly to Australia’s high terms of trade (Graph 8)

“The statement raised market expectations that China will act to restrict new steel production capacity to be built,” an unnamed steel trader in Shanghai told Reuters.

As seen in the 1-minute chart below, the news of the replacement curbs struck late during Monday's session, pushing rebar and iron ore futures sharply higher. Iron ore is shown in white, rebar in blue.

a screenshot of a computer© Provided by Business Insider Inc

And, as shown in both the chart and scoreboard below, those gains were consolidated upon during Monday's night session.

SHFE Rebar¥3,825,1.41%
DCE Iron Ore¥557.50,2.95%
DCE Coking Coal¥1,382.50,1.51%
DCE Coke¥2,077.00,0.78%

The late rally in futures on Monday, along with further gains overnight, points to the likelihood that spot markets may follow suit today.

Much will be determined by the performance of futures during Tuesday's day session.

Trade will resume in all commodity contracts at midday AEDT.

Australia, New Zealand dollars underpinned by upbeat China manufacturing activity .
<p>The Australian and New Zealand dollars held firm on Tuesday as an unexpectedly upbeat survey of Chinese manufacturing activity and broad softness in their U.S. counterpart augured well for Antipodean commodity exports.</p>The Aussie dollar (AUD=D4) made a two-month top of $0.7827 before running into resistance. The next chart targets are $0.7884 and $0.7898, both peaks from October. The kiwi held at $0.7102 (NZD=D4), just off last week's high at $0.7124.

—   Share news in the SOC. Networks

Topical videos:

This is interesting!