Commodities

Iron Ore Comes Back to Life – ShareCafe

Iron ore prices returned to prominence in the minds of investors with a solid rise on the re-opening of Shanghai and moves by the Chinese government to detail a series of stimulus measures.

The price of 62% Fe fines delivered to northern China rose more than 7% last week to end around $US142 a tonne, according to trading on the SGX futures market in Singapore.

That was up from around $US131 a tonne the previous Friday.

That’s still well short of the 2022 high of $US171 a tonne in early March but last Friday’s finish was around the level at the start of May.

ANZ analysts reckon that iron ore prices have found a floor thanks to more supply side issues, which could develop into gains as Chinese stimulus measures boost sentiment.

But the upside looks limited as caps on China’s steel output should keep demand muted, according to ANZ researchers in a report issued last Thursday.

ANZ said the Russia-Ukraine war continues to hang over commodity markets, with iron ore and steel flows now affected. Supplies are finding their way to Europe via land and rail but Russian shipments dropped to zero in March after 2.32 million tonnes were shipped in February.

ANZ said that India raised tariffs on iron ore exports (it has also banned exports of wheat and sugar but cut import duties on coking coal) to tame inflation while Australia and Brazil are struggling to sustain exports at current levels.

ANZ expects restocking to occur in the second half of the year to stimulate demand and lift iron ore prices, with China announcing stimulus measures aimed at boosting economic activity.

Restrictions remain Chinese on steel output remain, ANZ said on Thursday, while easing regulations on the housing sector will not solve its underlying issues.

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Oil perked up with a gain after settlement on Friday for no apparent reason.

Brent crude rose 1.8%, to settle at $US119.72 a barrel and U.S. West Texas Intermediate crude was up 1.7% to $US118.87.

Both benchmarks were up by more than $US3 in after-hours trading. That’s despite the higher output from the OPEC+ group – but as we have pointed out before, the group has fallen short of its monthly quotas anyway.

Meanwhile US energy firms last week left oil and natural gas rig numbers, despite more price rises – as well saw last week.

The oil and gas rig count was flat at 727 in the week to June 3, Baker Hughes Co said in its closely followed report on Friday.

The energy services firm said that puts the total rig count 271, or 59%, higher now than this time last year.

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

US crude output rose in March by more than 3% to 11.65 million barrels a day (bpd), its highest since November but still below the record 12.3 million bpd hit in 2019, the Energy Information Administration said last week.

Production was up to an estimated 11.9 million barrels a day in late May, changed from the previous week but 1.1 million barrels a day higher from 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 following the strong jobs data which showed 390,000 new jobs were created in May.

Yields on US10 Year Treasuries jumped more than 19 basis point to finish the week at 2.94%.

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

Spot gold dropped 0.9% to $US1,850.57 an ounce, while US gold futures fell 0.99% to $US1,848.10 an ounce.

Comex copper jumped 4% to $US4.475 by Friday which is just over the $US10,000 a tonne level.

Comex silver fell 0.6% to $US21.89 an ounce.

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Wheat and corn futures also weakened in Chicago on Friday as traders watched talks aimed at resuming shipments of Ukrainian grain stalled since Russia’s invasion.

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

Russian President Vladimir Putin has denied Moscow was preventing Ukrainian ports from exporting crops, though Russia’s army has seized much of Ukraine’s southern coastline and its warships control access to Black Sea ports.

Most-active wheat futures ended 18.25 US cents lower at $US10.40 a bushel on the Chicago Board of Trade. That’s down from a high of more than $US12.75 a bushel in early March, a fall of more than 18%.

Corn settled down 3.25 US cents at $US7.27 a bushel.

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