17 Jul 2017
Chinese iron ore, coking coal and rebar futures have rocketed higher on Monday, bolstered by the news that Chinese steel production hit a record high in June.
Having reversed earlier losses on Friday evening, all contracts have continued to push higher on Monday.
The latest buying binge followed the release Chinese Q2 GDP earlier in the session, including news that crude steel output from the world’s largest producer jumped to the highest level on record in June.
According to China’s NBS, steel output surged 5.7% to 73.23 million tons, surpassing the previous record of 72.78 million tons reported in April.
Over the half, China produced 419.75 million tons of crude steel, up 4.6% on the same period a year earlier.
A combination of high steel margins and low inventory levels has acted to support prices over the past month, contributing to renewed demand for iron ore and coking coal as mills rushed to lift production levels.
According to Metal Bulletin, the spot price for benchmark 62% iron ore fines stood at $65.74 a ton on Friday, leaving it up 23.2% from the recent low of $53.36 a ton struck on June 13.
Matthew Hope, equity research analyst at Credit Suisse, said earlier this month that iron ore prices should be supported in the current quarter given it is a seasonally a strong period for steel production and consumption.
Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, shares a similar view, noting in early July that “elevated steel mill margins and abundant spare capacity should provide the impetus for a short-term rally in iron ore prices”.
Source: Business Insider