Following the lead of Chinese futures which closed limit-up 6%, the spot iron ore price rocketed higher on Wednesday, rising to the highest level seen since June 12 last year.
According to Metal Bulletin, the spot price for benchmark 62% fines surged by a further 3.05%, or $1.92, to $64.77 a tonne. In the past three sessions alone the price has jumped by 11.1%, extending this years gains to an amazing 48.7%.
That’s nearly 50% in just 75 sessions of trade, something few saw as likely, let alone possible, as the price crashed to multi-year lows on a near daily basis last December.
According to analysts at Metal Bulletin, the gains in the spot price were driven yet again by another surge in Chinese steel prices.
“(Gains) in the iron ore spot market came after China’s spot rebar market skyrocketed to a new year-to-date highs on Wednesday amid a booming billet market in Tangshan,” they said in their Wednesday market update.
“Both major markets in the eastern and northern regions posted big gains after billet producers lifted prices of the semi-finished product by 140 yuan ($22) per tonne in the afternoon. Prices in Shanghai are now at their highest since December 2014, and those in Beijing, since September 2014.”
Although there is no one clear catalyst to explain the surge in steel prices, a rebound in Chinese construction activity in the first quarter of the year, along with inventory levels below historic norms, have likely contributed to the enormous recovery in prices.
The chart below by Macquarie Capital shows current steel inventory levels in China, compared to recent years.
Source: Business Insider