Iron ore prices in China hit record highs on Friday and booked their biggest quarterly gain since late 2016, buoyed by expectations that supply of the raw material in the world’s top steel producer will remain tight in the second-half of the year.
Steel futures rose for the eighth straight session, the longest run for Shanghai rebar since August 2017, driven by falling stockpiles and mandatory output cuts in some steel hubs.
The most-active September iron ore contract on the Dalian Commodity Exchange rose as much as 2.7% to 844 yuan ($122.94) a tonne, the highest since 2014 when trading in China’s iron ore futures started. It ended up 2.1% at 838.5 yuan.
The benchmark booked its seventh monthly gain and rose 47% in the June quarter, the biggest since the last quarter of 2016.
“The recent restart of the Brucutu iron ore mine in Brazil has brought no relief to the market, with tightness expected to persist for the foreseeable future,” said Daniel Hynes, senior commodity strategist at ANZ.
“Falling steel inventories (in China) also supported sentiment.”
Spot iron ore prices have jumped to the highest levels in more than five years, with benchmark 62% fines for delivery to China at $116.70 a tonne as of Thursday, data tracked by SteelHome consultancy showed.
Iron ore inventory at China’s ports had fallen to 116.75 million tonnes as of last week, the lowest since the start of 2017, SteelHome data showed, largely reflecting the impact of reduced supply from Brazil.
Brazil’s Vale SA, which shut mines for safety checks following a deadly tailings dam burst in January, has resumed full Brucutu operations, according to analysts.
“The mine should be back to 100% capacity (of 30 million tonnes) soon,” ANZ said in a note. “However, this didn’t completely ease concerns about shortages in the market, with Rio Tinto’s cut to guidance for 2019 output still fresh in its mind.”
Mining giant Rio Tinto Ltd last week lowered its guidance on iron ore volumes it expects to ship this year from the key Pilbara region in Australia for the third time since April, citing operational problems.
The most-active construction steel rebar contract, for October delivery, on the Shanghai Futures Exchange was up 0.7% at 4,065 yuan a tonne, near a more than 8-year peak of 4,095 yuan hit on Thursday. It gained 6.5% on a weekly basis, the biggest since July 2018.
Hot rolled coil, steel used in cars and home appliances, edged up 0.3% at 3,953 yuan a tonne and posted a weekly gain of 6.6%, the biggest since December 2018.
Other steelmaking raw materials traded mixed with Dalian coking coal up 0.7% at 1,392.5 yuan a tonne, while coke slipped 1.2% to 2,071 yuan.