Iron ore prices hit a two-month high at Friday's close, driven by
China's steady rollout of stimulus measures that boosted interest in the
steelmaking mineral.
62% Fe fines finished the week at
$US102.85 per tonne ($A150) on the SGX platform in Singapore, up more than 4%
on the day and marking the highest close since July 22.
Friday’s gain means the SGX price
rose 15% last week from Monday’s close of $US89.46 per tonne, in one of the
strongest trading weeks for some time.
The five-day gain was over 12%.
At the same time, the futures price
of Australian hard coking coal was also dragged higher. The SGX trading
platform saw premium Australian coal rise 14% to $US223 per tonne by Friday’s
close.
While China's surge helped, little
Australian premium coal is exported to China (if at all), with the majority
going to Japan, Taiwan, South Korea, and other smaller customers in the region.
The iron ore rally also transferred
to the shares of the country's biggest iron ore companies. Rio Tinto shares
rose 3.4% on Friday, up more than 15% for the week. BHP shares jumped 3.2%,
finishing the week up 13.4%, aided by the coal price surge. Fortescue shares
climbed 3.6% on Friday, rising over 16% for the week.
Debt-laden Mineral Resources saw
its shares soar 14% on Friday and more than 38% for the week, after closing the
sale of 49% of an iron ore haul road, netting the company $1.1 billion.
The improvement began on Tuesday
when China’s central bank and other regulators started rolling out stimulus
measures.
There was also positive news from
within China’s steel sector, unrelated to the stimulus measures. Portside iron
ore stocks fell again last week to 150.5 million tonnes, still high but down
from the September peak of around 158 million tonnes. Last week's decline of
2.6 million tonnes was significant.
Chinese traders noted that steel
mills increased ore purchases ahead of the seven-day National Day holiday,
which starts Tuesday, October 1st, and runs through October 7th. This holiday
is especially important this year as it marks the 75th anniversary of the
founding of modern China in 1949.
Increased activity among steel
mills saw four more blast furnaces brought back online last week, according to
the Mysteel website, with production rising for the fourth consecutive week.
This, in turn, led to a rise in capacity utilization.
While production has increased this
month, unsold metal product inventories across China's vast wholesale sector
have continued to decline, signaling improving demand according to some local
analysts.
