Speculative buying lifts China iron ore futures to contract high

Benchmark iron ore futures in China surged more than 7% on Thursday to hit a contract high, as speculative buying was fuelled by expectations that a recovering economy would lead to strong demand for the steelmaking ingredient.

The most actively traded iron ore futures on the Dalian Commodity Exchange, for May delivery, soared as much as 7.3% to 976 yuan ($149.10) per tonne, before closing up 6.8% at 971 yuan.

“We believe benchmarks were over-inflated to begin with, given that large volumes of ‘hot money’ have filtered through into iron ore as a speculative play on future economic growth,” said Atilla Widnell, managing director of Navigate Commodities.

Zhuo Guiqiu, an analyst with Jinrui Capital, also suggested that more money from governments’ loose monetary policies to weather the pandemic impact was flowing into markets with better fundamentals.