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Markets Live: ASX eyes 5800 points

Iron ore has extended its rallying ways after China officials said they would cap steel output from November to March. The US-lised shares of both BHP Billiton and Rio Tinto were higher in late trade in New York.

That drove steel futures sharply higher on bets that demand for steel will spike in a rush to buy while supply remains abundant.

Hebei’s provincial government announced late last Friday that several cities, including Shijiazhuang, Tangshan and Handan, will see steel production capped at 50 per cent of capacity during the heating season from November to March, according to Metal Bulletin.

The announcement sparked big gains in the ferrous markets – the price of billet increased by 120 yuan ($US17.80) per tonne over the weekend, and rose a further 30 yuan ($US4.50) per tonne on Monday. Prices for finished steel, in turn, rose on Monday.

Spot ore with 62 per cent content in Qingdao ended up 2.8 per cent to $US76.17 a tonne on Monday. The benchmark price is now up by more than 40 per cent since mid-June.

Chinese rebar steel futures surged as much as 7 per cent to their highest level in more than four years as buyers increased their purchases on expectations of reduced supply in the winter ahead due to Beijing-imposed capacity curbs. Iron ore futures also jumped more than 7 per cent at one point.

“In anticipation of less supply of steel, there should be some traders and end-users bringing forward their purchase plan,” said Richard Lu, analyst at CRU consultancy in Beijing.

“Because of expectations of reduced supply, prices may rise further in coming months, so it’s better to buy now,” Lu also said.

“There’s no rush among buyers to procure iron ore since there’s a lot of cargoes available, both (fresh) seaborne cargoes and those (stocked) at ports,” said a Shanghai-based trader.

Stockpiles of imported iron ore at China’s ports stood at 139.15 million tonnes on Friday, according to data tracked by SteelHome.

The level was not far below the record 141.45 million tonnes reached in June.

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