Iron ore comes back to life – ShareCafe


Iron ore prices have returned to the forefront of investors’ minds with a solid rally as Shanghai reopens and the Chinese government moves to detail a series of stimulus measures.

The price of 62% Fe fines delivered to North China rose more than 7% last week to end at around $142 a tonne, according to trading on Singapore’s SGX futures market.

That was up from around US$131 a tonne the previous Friday.

That’s still well below the 2022 high of US$171 a tonne in early March, but last Friday’s finish was around the level of early May.

ANZ analysts believe iron ore prices have bottomed on more supply-side issues, which could turn into gains as Chinese stimulus strengthens sentiment.

But the upside appears limited as China’s steel production caps are expected to keep demand muted, ANZ researchers said in a report released last Thursday.

ANZ said the Russian-Ukrainian war continues to weigh on commodity markets, with iron ore and steel flows now affected. Supplies are moving to Europe by land and rail, but Russian shipments fell to zero in March after 2.32 million tonnes were shipped in February.

ANZ said India had raised tariffs on iron ore exports (it also banned wheat and sugar exports, but reduced import duties on coking coal) to bring inflation under control, while Australia and Brazil struggle to maintain their exports at current levels.

ANZ expects the replenishment to occur in the second half of the year to boost demand and boost iron ore prices as China announces stimulus measures aimed at boosting economic activity.

Chinese restrictions on steel production remain, ANZ said on Thursday, while easing regulations on the housing sector will not solve its underlying problems.

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Oil rallied with a post-settlement gain on Friday for no apparent reason.

Brent crude rose 1.8% to US$119.72 a barrel and US West Texas Intermediate crude rose 1.7% to US$118.87.

Both benchmarks rose more than US$3 in after-hours trading. And this despite the higher production of the OPEC+ group – but as we have pointed out before, the group has not reached its monthly quotas anyway.

Meanwhile, US energy companies dropped oil and gas rig numbers last week, despite further price hikes – as they did last week.

The number of oil and gas rigs was flat at 727 in the week of June 3, Baker Hughes Co said in its closely-watched report on Friday.

The energy services company said the total number of rigs was 271, or 59%, higher now than at the same time last year.

US oil rigs remained flat at 574, while gas rigs remained at their highest level since September 2019 at 151.

U.S. crude production rose more than 3% in March to 11.65 million barrels per day (bpd), its highest level since November but still below the record 12.3 million bpd reached in 2019 , the Energy Information Administration said last week.

Production was estimated at 11.9 million barrels per day at the end of May, which was changed from the previous week, but 1.1 million barrels per day higher than at the end of May 2021.29dk2902l

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Comex gold prices fell nearly 1% after the US dollar rose and Treasury yields edged higher on strong jobs data that showed 390,000 new jobs were created in May.

Yields on 10-year US Treasuries jumped more than 19 basis points to end the week at 2.94%.

The US dollar rose on Friday and last week against most major currencies, although the Australian dollar – at 72.07 US cents, posted a gain of 0.6% for the week. The US dollar index rose 0.5% for the week.

Spot gold fell 0.9% to US$1,850.57 an ounce, while US gold futures fell 0.99% to US$1,848.10 the month. ounce.

Comex copper jumped 4% to US$4.475 on Friday, which is just above the US$10,000 per tonne level.

Silver Comex fell 0.6% to US$21.89 an ounce.

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Wheat and corn futures also weakened in Chicago on Friday as traders watched talks to resume Ukrainian grain shipments stalled since the Russian invasion.

Ukraine was in the center of attention as the United Nations said its aid chief, Martin Griffiths, was in Moscow to discuss opening the way for grain and other food exports from the Black Sea ports.

Russian President Vladimir Putin has denied that Moscow is blocking Ukrainian ports from exporting crops, although the Russian military has seized much of Ukraine’s southern coast and its warships control access to the ports of the Black Sea.

The most active wheat futures ended down 18.25 US cents at US$10.40 a bushel at the Chicago Board of Trade. This is down from a peak of over US$12.75 a bushel in early March, a drop of over 18%.

Corn settled 3.25 US cents at US$7.27 a bushel.

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