According to The Australian Financial Review, Chinese iron ore futures climbed to their strongest level in more than two years on Friday, reflecting firm demand for the steelmaking raw material as steel prices stretched gains along with coal to multi-year highs.
Helped by rising futures and increased appetite for high-grade ore, spot iron ore prices also extended their rally to over six-month peaks and were on course for their fourth week of gains.
Chinese steel mills now prefer high-grade iron ore, mainly from Australia and Brazil, to boost productivity and consume less coal as a shortage in China keeps prices of the fuel high, traders said.
"Offers of high-grade to the market are not as much as the past few weeks. Some people are reluctant to quote their cargo because they feel the market will get stronger so they prefer to wait," said a Shanghai-based iron ore trader.
The most-traded iron ore for January delivery on the Dalian Commodity Exchange rose as far as 509.50 yuan ($US75) a tonne, the highest since July 2014. It closed up 1.1 per cent at 500 yuan.
On the Shanghai Futures Exchange, construction steel product rebar finished 2.7 per cent higher at 2716 yuan a tonne, after earlier hitting 2767 yuan, the highest since September 2014.
China's efforts to cut excess steel capacity have helped spur prices higher. Baosteel Group said it would cut steel production capacity by 11 million tonnes from 2016 to 2017, ahead of an earlier target.
Trading in the physical iron ore market was largely brisk this week, pushing the 62-per cent spot benchmark to $US64.50 a tonne on Thursday, up 0.2 per cent from Wednesday and the strongest since April 29, according to The Steel Index (TSI).
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