Iron Ore Regains Momentum
Rising Chinese steel prices helped bolster iron ore prices with a 4% rise last week in something of a surprise with talk of a slowing in construction activity.
Steel ands iron ore futures rose though even though steel production caps are now in place in the north and north east of the country for winter.
As a result, the Metal Bulletin said seaborne iron ore prices again rose on Friday and are up more than 16% for the month so far.
By the close prices were up 8.5%, or $US5.33 a tonne to $US67.94 a tonne, the highest for 9-months.
Friday’s rise of 25 cents was the smallest of the week, but the price is now closing in on $US70 a tonne, a level no forecasters saw as possible after the production cut news emerged several months ago.
That will help push the prices of the major miners higher on the ASX later today. Shares in Rio Tinto added 1.7% last week to $72.10, while BHP climbed 3.1% to $27.97.
Fortescue Metals, however, failed to lift with the bulk commodity, losing 1.5% over the week to $4.64. South32 jumped 3.6% to $3.42 despite its second warning in a month on rising raw material costs.
A surge in Chinese coking coal futures helped boost iron ore late in the week iron ore.
Coking coal futures surged more than 5% on Thursday to their highest level since mid-September, supported by tighter supply thanks to China's environmental clampdown.
Reuters reported that January coking coal futures on the Dalian Commodity Exchange rose nearly 6% to $US202 a tonne on Friday, the highest since September 15.
The Metal Bulletin reported that its coking coal indices were all unchanged on Friday, at $US198.92 per tonne cfr China and $US198.25 per tonne fob Australia for premium hard coking coal (hard, low ash).
Traders say steel mills are buying higher quality imported iron ore and coking coal because it is less polluting (lower sulphur and less highly polluting sintering is needed compared with low grade ore and coal from domestic mines).
They also say the steel production caps have produced a growing shortfall in supplies in the Asian raw steel market which is now ticking higher traders realise there will be a shortage of metal in the first half of 2018.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.