Iron ore prices just surged out of nowhere

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  • Iron ore spot markets jumped on Wednesday with the benchmark price logging its largest gain in nearly a month.
  • The strong gains came despite further weakness in Chinese steel and bulk commodity futures during the session.
  • Futures continued to slide in overnight trade on Wednesday, casting doubt as to whether the rally in spot markets can be sustained on Thursday.

Iron ore spot markets ripped higher on Wednesday, logging the largest gains in close to a month.

According to Metal Bulletin, the price for benchmark 62% fines surged 2.3% to $67.37 a tonne, the largest one-day percentage gain since August 6.

The benchmark had fallen to a one-month low earlier in the week.

Modest gains were also recorded across low and higher grades.

58% fines added 0.4% to close at $36.28 a tonne. 65% fines fared a little better, rising 1.1% to $94.50 a tonne.

The gains in spot markets came despite continued weakness in futures markets.

After hitting a seven-year high last week, rebar futures in Shanghai continued to slide, falling for a sixth consecutive session.

The January 2019 contract finished at 4,160 yuan, down from Tuesday’s night session close of 4,212 yuan. It traded significantly higher in early deals before reversing hard into the close.

Similar price action was also seen in bulk commodity contracts in Dalian — including iron ore — which gave up earlier gains to close modestly in the red.

Iron ore futures finished trade at 480 yuan, marginally below Tuesday’s night session close of 483 yuan. Coking coal and coke futures also lost ground during the session.

The reversal in all four contracts continued in overnight trade, as seen in the scoreboard below.

SHFE Rebar ¥4,128 , -2.27%
DCE Iron Ore ¥478.50 , -1.03%
DCE Coking Coal ¥1,250.50 , -0.91%
DCE Coke ¥2,537.50 , -1.82%

The price action suggests iron ore spot markets may soften after Wednesday’s sudden surge.

Trade in all Chinese commodity futures will resume at 11am AEST.

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