Posted on 07 Jan 2015
China’s iron ore futures jumped 4 percent on Tuesday to reach their highest level since early November, as bad weather in Australia, the world’s biggest producing nation, threatened to disrupt shipments.
A tropical low pressure system is bringing heavy rain and floods to northwest Australia, with a chance of up to 50 percent that it could strengthen into a tropical cyclone by Wednesday.
Ports in Australia may have to be closed as a result of the cyclone, analysts said. Each year, cyclones close shipping lanes and disrupt the mining of hundreds of millions of tonnes of iron ore, coal, sugar and other commodities in Australia.
Iron ore futures for May delivery on the Dalian Commodity Exchange rose by their maximum daily amount of 4 percent to 520 yuan ($83) a tonne. The most-traded May rebar contract on the Shanghai Futures Exchange was up 2.46 percent at 2,619 yuan.
“Weather is one factor pushing up iron ore futures prices but it is not necessarily affecting spot prices. High levels of inventory at ports and low demand from steel mills in China cannot lift spot iron ore prices,” said a Ningbo-based trader.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI fell 0.56 percent to $70.80 a tonne on Monday, according to data compiled by the Steel Index.
According
to data provider SteelHome, imported iron ore stockpiles at major Chinese ports
SH-TOT-IRONINV fell for the fifth week in a row last week, but they remain at
100.6 million tonnes, 15 percent higher than the same time last year.
Weak appetite in China is expected to remain at least until the Chinese new year on Feb. 19, though the impact of the cancellation of a tax rebate on boron-steel exports is expected to be limited, with the move already priced into the market and producers exploring new options.
There have also been growing concerns over the debts of local governments, which may hurt their ability to fund infrastructure projects.
The
China Iron and Steel Association (CISA), in its regular market report published
on
Monday, said that there was little likelihood of any recovery in iron ore
prices in January,
noting that there was still room for further declines.
“As
the winter season continues and the (Chinese new year) holiday approaches,
steel
production is likely to cool down, the gap between iron ore supply and demand
is unlikely to
ease and iron ore prices will fluctuate in line with current trends,” the
association said.
Source: Reuters
