Iron ore powers back to $100 on demand

On the Dalian Commodity Exchange, most-active futures surge as much as 8.3% to 694 yuan a tonne

Iron ore keeps getting told the end is nigh: so far in 2017, the response has been the end’s just another high. The rally has been powerful enough to push futures in China back to $100 a metric tonne as spot prices trade at levels last seen in 2014, boosting miners shares including Rio Tinto Group.

On the Dalian Commodity Exchange, most-active futures surged as much as 8.3 per cent to 694 yuan ($101) a tonne and settled at 688 yuan, while in Singapore SGX AsiaClear futures rallied to $85.79. On Thursday, spot ore with 62 per cent content in Qingdao rose to $83.84 a dry tonne, the highest since October 2014, according to Metal Bulletin Ltd.

Iron ore rallied in 2016 as China added stimulus, supporting steel production and confounding bears who’d highlighted prospects for additional low-cost output and concerns that the top buyer wouldn’t be able to absorb the supply. The same dynamic has been at play in recent weeks, with banks including Goldman Sachs Group flagging risks of weaker prices over the course of 2017 even though near-term support was seen as strong. Friday’s gain came amid optimism about the immediate outlook for consumption.

“Construction demand is returning, with developers reportedly buying steel now even if they have not resumed construction on certain projects,” Tomas Gutierrez, an analyst at consultancy Kallanish Commodities, said in an email. “The second half of the year is likely to contain surprises and lower prices, but for the moment traders and steelmakers plan to make the most of a relatively strong market in the coming weeks.”

Miners’ shares are benefiting from the rally. Rio Tinto, which last week reported its first profit gain since 2013, jumped as much as 3.5 per cent in London, while Vale has climbed 26 per cent in 2017. In the US, Cliffs Natural Resources surged 19 per cent on Thursday, the most since May.

Data from China yesterday pointed to robust local demand for iron ore, as well as steel, as imports of the raw material rose while overseas sales of steel fell. Iron imports gained 12 per cent to 92 million tonnes in January from a year ago, according to customs data. Sensex (IN)