On China's Dalian Commodity Exchange, most-active futures surged as much as 8.3 per cent to 694 yuan ($US101) a tonne and settled at 688 yuan, while Singapore's SGX AsiaClear contract also climbed. Spot ore with 62 per cent content in Qingdao advanced 3.3 per cent to $US86.62 a tonne, the highest since September 2014, according to Metal Bulletin.
Iron ore rallied in 2016 as China added stimulus, supporting steel production and confounding bears who'd highlighted prospects for additional low-cost output and concerns that the top buyer wouldn't be able to absorb the supply. The same dynamic has been at play in recent weeks, with banks including Goldman Sachs flagging risks of weaker prices over the course of 2017 even though near-term support was seen as strong. Friday's gain came amid optimism about the immediate outlook for consumption.
"Construction demand is returning, with developers reportedly buying steel now even if they have not resumed construction on certain projects," Tomas Gutierrez, an analyst at consultancy Kallanish Commodities, said in an email. "The second half of the year is likely to contain surprises and lower prices, but for the moment traders and steelmakers plan to make the most of a relatively strong market in the coming weeks."
Miners' shares are benefiting from the rally. Rio Tinto Group, which this week reported its first profit gain since 2013, was 5.5 per cent higher in late Friday trade in London. Vale also was up more than 5 per cent on Friday, lifting its year to date advance to 32 per cent
Data from China on Friday pointed to robust local demand for iron ore, as well as steel, as imports of the raw material rose while overseas sales of steel fell. Iron imports gained 12 per cent to 92 million tonnes in January from a year ago, according to customs data. Sales of steel were at the lowest since 2014.
With stockpiles of iron ore at China's ports at a record and miners including Brazil's Vale bringing on new supply, Liberum Capital is among forecasters seeing lower prices, predicting a drop back below $US50 in the second half. Citigroup has said it sees a sharp correction, while top forecaster RBC Capital Markets described prices in January as unsustainable.
Not everyone is bearish. Prices may average $US73 this year, according to JPMorgan Chase & Co, which sees them at $US71 in the third quarter and $US66 in the final three months.
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