BEIJING/SINGAPORE: Benchmark iron ore futures on China's Dalian Commodity Exchange soared nearly 10% on Friday to break above the 1,000 yuan ($152.95) per tonne level for the first time ever, spurred by supply concerns and booming steel demand in the world's second-largest economy.
Traders said concerns that a cyclone might affect loadings in top supplier Australia were the latest supply-side hit for the market, which is already grappling with lower output from No. 2 producer Brazil.
Miner BHP Group assured the China Iron & Steel Association that weather conditions would not affect shipments and that the company was aiming to reach the upper limit of its output range.
However, three iron ore traders said any disruption to supplies would be impactful given the current strong state of demand.
"From December to end-February is Australia's typical cyclone season, which could affect their output," said a Beijing-based trader.
China's manufacturing sector is booming, and goods exports in November jumped by their most in almost three years on strong global demand for steel-heavy appliances.
That voracious appetite has surpassed the expectations of many steel producers, who have struggled to keep up with demand. Steel product stocks in China have declined nearly 38% since September.
"Steel mills and traders were too pessimistic earlier," said a Shandong-based iron ore trader. "They didn't expect steel products' destocking could be this good before November."
Further fanning supply concerns, the state-backed Global Times wrote in an editorial on Thursday that "it is wishful thinking that iron ore could be an exception in ongoing China-Australia trade rows," in reference to the spat between Beijing and Canberra that has affected trade in coal, beef and other products.
More than 60% of China's iron ore imports come from Australia.
"If iron ore prices continue to soar, resulting in turmoil in the industry, more calls for regulatory interventions should be expected," said the editorial.
The most-traded iron ore futures contract on the Dalian Commodity Exchange, for May delivery, surged as much as 9.9% to 1,042 yuan per tonne. It closed up 4.4% on Friday and gained 6.4% for the week, its fifth straight weekly gain.
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