• Iron ore spot markets rose for a second session on Monday, helped by further gains in Chinese steel prices.
• The price for 58% fines rose to the highest level since September 2017. The price discount to the benchmark and 65% fines also narrowed to multi-year lows.
• The gains came despite the release of very weak Chinese trade data for December.
• On Monday, Chinese Premier Li Keqiang hinted that policymakers may roll out further stimulus measures to boost economic activity in the months ahead.

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Iron ore spot markets rose for a second session on Monday, helped by further gains in Chinese steel prices.

According to Metal Bulletin, the price for benchmark 62% fines rose 0.5% to $73.80 a tonne, pushing back towards the multi-week high of $74.46 a tonne struck on January 8.

Continuing the theme seen in prior sessions, lower grade ore outperformed with the price for 58% fines jumping 1.2% to $48.33 a tonne, leaving it at the highest level since September 5, 2017. That saw the discount to the benchmark price fall to the smallest level since August 2017.

The price for 65% Brazilian fines held steady at $88.20 a tonne for a third consecutive session. With prices for lower grade ore scaling fresh cyclical highs. That saw the price premium demanded for 65% fines narrow to fresh multi-year lows.

“China’s preference for higher grade iron ore has declined notably from recent peaks as mills look to cheaper lower grade alternatives like the 58% Fe grade following the fall in steel margins,” said Vivek Dhar, Minign and Energy Commodities Analyst at the Commonwealth Bank.

“The fall in high grade iron ore prices doesn’t mean that China’s preference for high grade ore is set to diminish structurally, but the economics of higher grade ore over mid and low grade ore remains an important consideration.

“Steel margins remain the critical driver of iron ore prices and China’s preference for higher grade ore. With steel margins still subdued, we see downside risks to iron ore prices.”

The gains in spot markets followed another strong day for Chinese steel futures as traders largely ignored the release of weak Chinese trade data for December.

The most actively traded rebar and hot-rolled coil contracts finished at 3,575 and 3,459 yuan respectively, above Friday’s night session close of 3,530 and 3,425 yuan.

Those moves helped to drag bulk commodity contracts higher in Dalian with iron ore, coking coal and coke futures closing at 513, 1,245 and 2,015 yuan respectively, all well above where they finished on Friday night.

There was little reaction to data showing Chinese iron ore imports fell by 1% in 2018 to 1.064 billion tonnes.

After rising solidly during the day session, profit-taking was evident in overnight trade on Monday with all five contracts finishing lower.

SHFE Hot Rolled Coil ¥3,437 , -0.17%
SHFE Rebar ¥3,553 , 0.00%
DCE Iron Ore ¥510.00 , 0.29%
DCE Coking Coal ¥1,241.50 , -0.08%
DCE Coke ¥2,010.00 , 0.78%

The modest reversal came despite reports from Chinese state media, citing remarks from Premier Li Keqiang, that policymakers may look to roll out further stimulus measures in the months ahead.

“We should strive for a good start in the first quarter to create conditions for completing the key full-year development targets and tasks,” Li reportedly said.

“Our country’s development environment is becoming more complex this year, there are more difficulties and challenges and the downward pressure on the economy is increasing.”

Trade in Chinese futures will resume at midday AEDT.

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