China rally sees return of iron ore, steel confidence

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China rally sees return of iron ore, steel confidence

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Category : Mining News , News

Both iron ore and steel have surged in China after investors scooped up commodities that were cheapened by a period of losses.

However, this could be shortened by uncertain demand outlooks.

According to the Dalian Commodity Exchange, iron ore futures increased six per cent to $114, while construction steel rebar also added six per cent to nearly $570 a tonne.

Coal and iron ore prices dropped from recent highs after a raise in transaction charges in Shanghai, Zhengzhou, and Dalian, which aimed to crack down on speculative trading, the AFR reports.

Analyst at CRU consultancy in Beijing, Richard Lu, said, “I think it’s driven by speculative trading again.”

In terms of steel, we haven’t seen any real support from the demand side.”

Lu went on to attribute the drop in steel demand to the start of winter in China as freezing temperatures have left many construction projects in the northern parts suspended.

The lower demand, however, could increase iron ore supply at China’s ports. Imported iron ore stockpiles hit a little over 110 million tonnes last week, a 2.83 million tonne jump from the week before – the highest since September 2014.

Share markets closed with significant gains in the mining sector, with BHP surging 96 cents to $25.24, according to The Bull. Rio Tinto had a $1.28 increase to $58.67 and Fortescue jumped 39 cents to $6.12.

Oil and gas also surged this week with Santos rising 15 cents to $4.15 while Woodside Petroleum jumped 71 cents to $30.50.

The rises in the oil market particularly came from returned confidence following the US election.

Michael Gable, Fairmont Equities managing director said, “It reflects the relief that the last six months, with Brexit and the election, is over.”

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