Iron ore hits nine-month high on sustained rally

[MANILA] Iron ore rose by more than 1 per cent to hit a fresh nine-month peak on Tuesday, a day after soaring nearly 20 per cent, on expectations of a short-term boost in China's steel production.

The bullish market sentiment prevailed, with ferrous futures in China rising by their exchange-set limits, bringing iron ore's year-to-date gain to 46 per cent, making it the best performing commodity for 2016.

Price gains were underpinned by forecasts for a jump in Chinese steel making, as producers see brisk seasonal demand.

"While the rally's hard to substantiate I can see a scenario where the market is pricing in a US$60-tonne iron ore on the basis of a potential rise in steel production in China," said Daniel Hynes, commodity strategist at ANZ.

That increase may be supported by measures aimed at stimulating China's economy, Mr Hynes said, although he expects the country's steel output to actually drop in 2016.

Iron ore for immediate delivery to China's Tianjin port rose 1.1 per cent to US$63.30 per tonne, its strongest since June 15, according to data compiled by The Steel Index (TSI).

The 19.5 per cent rally in the spot benchmark on Monday was its biggest gain since TSI began assessing prices in 2008.

The most-traded May iron ore on the Dalian Commodity Exchange closed up 5.9 per cent at the exchange-set ceiling of 423 yuan (S$90) per tonne, its highest in a year.

On the Shanghai Futures Exchange, the most-active May rebar closed up 8 per cent at 2,194 yuan per tonne, also hitting its upside limit.

A 170,000-tonne cargo of Australian 62-percent grade Pilbara iron ore fines was sold at US$64 per tonne on the globalORE platform on Tuesday, a dollar lower than on Monday.

"Some sellers are holding back and buyers are also not very willing to buy at high levels," said a Shanghai-based iron ore trader. "I think prices went up without a solid base."

May iron ore on the Singapore Exchange slid 8.8 per cent to US$53.49 per tonne, after soaring more than 21 per cent on Monday.

China's iron ore imports rose 8.3 per cent to 73.61 million tonnes in February from a year ago, customs data showed, as top miners boosted shipments to gain more market share in the world's top consumer.

"But with iron ore prices rising there is a chance we could see some of the Chinese domestic iron ore mines that have been closed for the past 12 months reopen, which could potentially result in some weakness in imports later this year," said ANZ's Mr Hynes.

Top iron ore miners Vale and Fortescue Metals Group said they are in talks that could see the Brazilian producer taking a minority stake in the Australian miner and the blending their iron ore to win market share in China.

REUTERS