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Iron ore surges 15 pct for week on China outlook, futures boost

Published 11/11/2016, 02:11 pm
Updated 11/11/2016, 02:20 pm
© Reuters.  Iron ore surges 15 pct for week on China outlook, futures boost

* Spot iron ore hits two-year high

* Posts biggest weekly gain since records began in 2008

* Dalian iron ore went limit-up for a third day on Friday

By Manolo Serapio Jr

MANILA, Nov 11 (Reuters) - Spot iron ore prices hit a fresh two-year high and were headed for their biggest weekly gain since price tracking began in 2008 as iron ore futures in China rallied further on Friday amid an optimistic outlook for Chinese steel demand.

Chinese iron ore futures surged nearly 6 percent to hit their exchange-set ceiling for a third day in a row while coking coal stabilised after recent sharp gains.

Higher fees imposed by the Dalian Commodity Exchange on trading of coking coal and coke futures have switched some funds into iron ore, traders and analysts said, helping iron ore outperform the rest of the ferrous market. most-traded January iron ore on Dalian DCIOcv1 rose as much as 5.9 percent to touch its upside limit of 614.50 yuan ($90) a tonne, its highest since April 2014. It was up 5.3 percent at 611 yuan by 0245 GMT.

The strength in futures helped lift trades in the physical iron ore market, with spot cargoes from top suppliers Australia and Brazil sold at higher prices, traders said.

Iron ore for delivery to China's Tianjin port .IO62-CNI=SI climbed 4.5 percent to $74.20 a tonne on Thursday, its strongest since November 2014, according to The Steel Index (TSI).

For the week, the spot benchmark has risen almost 15 percent, its biggest such gain since TSI began tracking prices in October 2008.

"While some of the lift can be attributed to more optimistic demand prospects in China's manufacturing and property sectors, speculative trading is also playing a major role," Commonwealth Bank of Australia analyst Vivek Dhar said on iron ore's rapid rally.

Moves by Chinese exchanges to increase trading charges following a surge in futures markets, particularly in coal, have diverted funds to iron ore futures, Dhar wrote in a note.

"I think the steel mills in China are just getting a lot more confident about the outlook with the market depressed for so long," said Daniel Hynes, commodity strategist with ANZ Bank.

"And supply growth is starting to wane. There is also some fear that the market will tighten up quickly and certainly the coal traders got caught out and maybe that type of panic is starting to emerge in the iron ore market as well."

Beijing's push to curb overcapacity in coal has shuttered many mines across the country, limiting domestic supply and fueling a price rally this year.

Rebar steel on the Shanghai Futures Exchange SRBcv1 was up 0.2 percent at 3,028 yuan a tonne and Dalian coking coal DJMcv1 rose 1.3 percent to 1,542 yuan.

($1 = 6.8110 Chinese yuan)

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