It’s only a few days back that the market heard from the World Bank forecasting a weak outlook for iron ore prices in the near term and coming next year. Juxtaposed to that, Chinese iron ore futures were seen to rally over 6 per cent to their strongest level in two weeks on November 06, 2017. This led the ASX mining index move to a three-year high since August 2014, with the push from the rally in Chinese iron and steel prices on Monday.
Primarily, a boost to the steel-making raw material came in from the news that China’s top steel producing province has exceeded the capacity reduction targets, under the steps to curb pollution. Ahead of the annual target, Hebei province was noted to have cut down 25.55 million tonnes of its steel-making capacity up till now in this year. Hebei is also said to confine its steel and iron output by 50 per cent in major producing cities (such as Tangshan, Handan and Shijiazhuang).
Metal Bulletin has lately indicated that iron ore for delivery to the Chinese port of Qingdao last traded up $US3.48 at $US63.36 a tonne, and this comes after reaching the lowest level of $US58.52 on October 31, 2017, in over a four-months’ time span.
Overall, the gains in steel led to the prices of raw materials iron ore and coking coal with iron ore on the Dalian Commodity Exchange surging 6.1 per cent. This overnight rally led the iron ore miners zoom up with Fortescue Metals rising 4.7 per cent, BHP Billiton moving up 3.9 per cent and Rio Tinto surging 2 per cent. BlueScope Steel was also seen rising 5.3 per cent with the sector gains.
ASX 300 Metals and Mining Index (Source: Financial Times)
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