Last Thursday iron ore prices fell to a one month low, but were soon restored the following Friday, led by mid and higher grades.
After falling to a one month low of $66.20 a tonne, the price for iron ore jumped 1.3% above the 62% fines recovering to 67.03 a tonne, as reported by Metal Bulletin.
Currently iron ore prices are $67.42 a tonne.
Iron ore prices reflecting renewed strength in China
Iron is mined in around 50 countries and is used to make steel for infrastructure, appliances and cars. So it makes sense that supply and demand are largely driven by economic growth as when the need for steel in construction goes up, so too does the price.
The world’s largest consumer of metals, AKA China, affects iron ore prices so significantly that the spot price can almost be considered an alternative measure for China’s economic health.
So unsurprisingly, the move came after renewed strength in Chinese steel futures and was aided by last fortnight’s decline in Chinese inventory levels.
This saw Chinese steel inventories fall by 42,400 tonnes to 10.3 million tonnes last week, according to Mysteel consultancy data. This was led by declines in both rebar and hot-rolled coil stock piles.
The bounce back in rebar futures probably contributed to the moderate strength in iron ore futures in Dalian. It broke a three day losing streak with the January 2019 contract ending the session at 490.5 Yuan.
Despite this, there was little movement in Chinese steel and bulk commodity futures on Friday evening. This gave investors little idea as to which direction spot markets will now move.
It’s also noteworthy that amongst all these returns, coking coal and coke futures resisted the dominant trend and sank to 1,290 and 2,544 yuan respectively.
What we can expect for future iron ore prices
Last Friday’s overnight trade saw little shifts in prices of rebar, iron ore, coking coal and coke. This uneventful and flat-line performance is offering little insight into the direction that spot markets will move in future.
But some analysts did warn of increasing downward pressure in the steel market as investors worry that prices have already reached a high level, according to Reuters.
All in all, investors should keep a close watch on China’s economy and look to its slowing economic growth for some point of reference.
For Markets and Money
PS: Aussie investors have seen great results from iron ore investments in the past. But Markets & Money Resources Analyst Jason Stevenson argues that the biggest gains in the mining sector aren’t made with big, conservative iron ore miners. He believes that your best opportunities lie in smaller, more speculative stocks. The kind that could see massive share price moves from a single positive drill hole result. For 10 of his favourite mining stocks on the Aussie market this year, download his Free Report: ‘Top 10 Mining Stocks 20018’ right here.