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Dalian iron ore hits 2-year high on rally in coal, steel

Published 04/11/2016, 02:04 pm
Updated 04/11/2016, 02:10 pm
© Reuters.  Dalian iron ore hits 2-year high on rally in coal, steel

* Spot iron ore hits 6-month high, eyes fourth weekly gain

* Coking coal soars nearly 6 pct, coke strongest since 2013

By Manolo Serapio Jr

MANILA, Nov 4 (Reuters) - Chinese iron ore futures climbed to their strongest level in more than two years on Friday, reflecting firm demand for the steelmaking raw material as steel prices stretched gains to hit their highest since April.

Helped by rising futures and increased appetite for high-grade ore, spot iron ore prices also extended their rally to over six-month peaks and were on course for their fourth week of gains.

Chinese steel mills now prefer high-grade iron ore, mainly from Australia and Brazil, to boost productivity and consume less coal as a shortage in China keeps prices of the fuel high, traders said.

"Offers of high-grade to the market are not as much as the past few weeks. Some people are reluctant to quote their cargo because they feel the market will get stronger so they prefer to wait," said a Shanghai-based iron ore trader.

The most-traded iron ore for January delivery on the Dalian Commodity Exchange DCIOcv1 rose as far as 509.50 yuan ($75) a tonne, the highest since July 2014. It was up 2 percent at 504.50 yuan by 0253 GMT.

On the Shanghai Futures Exchange, construction steel product rebar SRBcv1 was up 3 percent at 2,724 yuan a tonne, after earlier hitting a six-month peak of 2,748 yuan.

Trading in the physical iron ore market was largely brisk this week, pushing the 62-percent spot benchmark .IO62-CNI=SI to $64.50 a tonne on Thursday, up 0.2 percent from Wednesday and the strongest since April 29, according to The Steel Index (TSI).

For the week, the spot price has so far risen 2.2 percent.

"High coke and coking coal prices stimulated demand (for) high grade iron ore fines," said TSI, which tracks physical deals.

Iron ore with iron content of 60 percent and above is considered high-grade and the gap between the 62-percent benchmark and 58-percent grade .58LA-CNI=SI stood at $8.60 a tonne on Thursday, near a one-month high.

Dalian coking coal for January delivery DJMcv1 surged 5.6 percent to 1,387.50 yuan a tonne, after touching a contract high of 1,394 yuan. Dalian coke DCJcv1 rose 4.3 percent to 1,870 yuan, after earlier hitting 1,875 yuan, its strongest since March 2013.

($1 = 6.7608 Chinese yuan)

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