The seaborne iron ore market hit a new 2016 high Monday as a spike in billet price buoyed buying interest and propelled a spate of spot deals at higher levels.
S&P Global Platts assessed the 62%-Fe Iron Ore Index at a year-to-date high of $83.95/dry mt CFR North China Monday, up $2.80/dmt from Friday.
IODEX saw its previous high for the year on December 7 at $82.30/dmt CFR Qingdao.
The front-month January IODEX swap was up $2.2/dmt on the day at $79.40/dmt.
Continued strength in the steel market has caused iron ore prices to rise as mills pursued productivity to maximize margins, sources said.
"Steel prices are up, and at the moment margins are still there, so production is still ongoing," an eastern China trader said.
However, the spot price of square billet in Tangshan, a closely watched barometer, spiked Yuan 190/mt from Friday to Yuan 3,110/mt ($450.16/mt) ex-stock Tangshan Monday.
"The Chinese mills are now chasing after cargoes," said a Beijing trader, adding that stronger steel prices are sparking buying interest from Chinese buyers.
A strong steel performance also pushed up derivatives.
The most liquid January rebar contract on the Shanghai Futures Exchange surged Monday, last trading at Yuan 3,444/mt ($498.51/mt), up Yuan 99/mt from Friday, and settling at Yuan 3,436/mt, up Yuan 111/mt.
On the Dalian Commodity Exchange, the most liquid May iron ore contract last traded at Yuan 635.5/dmt ($91.99/dmt), up Yuan 17.50/dmt from Friday, and settled at Yuan 634.50/dmt, up Yuan 20/dmt over the same period.
Mills were also actively considering steel and metallurgical coal and coke prices to determine the most cost effective blast furnace mix, sources said.
"Mills margins up, medium and high grade fines will remain popular," an eastern China mill source said.
