Iron Ore Daily Market Update

Iron ore futures surged above $110 on Monday as China’s manufacturing activity continued its recovery from the coronavirus. The Caixin/HIS Markit PMI rose to 52.8 last month from June’s 51.2, the third consecutive month of growth and the biggest jump since January 2011. PMI readings above 50 indicate expansion, while those below that signal contraction. PMI readings are sequential and indicate on-month expansion or contraction. “Growth forecasts were underpinned by expectations that economic activity and client demand will continue to recover from the pandemic,” IHS Markit said in a statement. Economists polled by Reuters had expected Caixin/Markit manufacturing PMI to come in at 51.3 for July. In addition, the rally today was also fueled by expectations that strong demand in China and lower supplies will leave the market in a deficit this year, according to Capital Economics Ltd. Chief Commodities Economist Caroline Bain. As bad weather in China starts to subside, steel demand growth will accelerate, especially as fiscal spending is set to rise in the months ahead, she said in a report. The return of Brazil supply is also set to take a little longer with delayed court approvals and safety tests for Vale SA’s recovery from its dam collapse last year, and reduced manpower, she said. Meanwhile, China’s monetary conditions indicator points to likely higher steel output in the months ahead, according to a Citigroup Inc. note. “We believe China’s steel output/consumption should be well up on 2019 levels as consumption is up 7.9%” year-on-year in June,” it said.

Futures in Singapore extended its gains further during London morning. Aggressive Sep buyers were seen in the market; Sep traded 108.25 and then at 109.1 and 109.3 during the morning session. Spreads also widened out a fair bit. Aug/Sep was seen trading up from 3.1 to 3.35, leaving Q4/Q1 to as high as around 7.05. After the close, iron ore futures continued to creep higher, with Sep edging to 110.7 before coming back down a touch. Dec did trade 101.6 after the close.
Source: FIS