UPDATE 1-Iron ore heads for biggest weekly gain ever on China outlook, futures
11/11/16 19:11
A miner holds a lump of iron ore at a mine located in the Pilbara region of Western Australia, December 2, 2013.
Spot iron ore hits two-year high
Has biggest weekly gain since records began in 2008
Dalian iron ore went limit-up for a third day on Friday
Broad rally in China, with copper surging 9 pct
(Adds broad rally in Chinese commodities, updates prices)
Spot iron ore prices hit a two-year high and were headed for their biggest weekly gain since tracking began in 2008 as iron ore futures in China rallied further on Friday amid an optimistic outlook for Chinese steel demand.
The gains in China's commodities futures ranged from industrial to agricultural, with copper surging 9 percent and cotton up 5 percent, as funds bet on the world's No. 2 economy stabilising.
Chinese iron ore futures surged 6 percent to hit their exchange-set ceiling for a third day in a row as Shanghai steel futures raced to their strongest in more than two years.
The most-traded January iron ore on Dalian DCIOcv1 closed up 6 percent at its upside limit of 614.50 yuan ($90) a tonne, its highest since April 2014.
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, and that could boost the spot benchmark still further on Friday.
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 about the 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 fuelling a price rally this year.
Rebar steel on the Shanghai Futures Exchange SRBcv1 rose 3.5 percent to end at 3,126 yuan a tonne after peaking at 3,148 yuan, its highest since July 2014. Dalian coking coal DJMcv1 jumped 2.6 percent to 1,563 yuan.
($1 = 6.8110 Chinese yuan)
FAS Price at posting:
0.4¢ Sentiment: Sell Disclosure: Held
