Seaborne iron ore prices have continued to move higher as China’s week-long New Year holiday approaches. The threat of supply disruption from Covid in Australia helped fuel the rise, but a surge in position-taking was driven by optimism over Chinese demand.

The Kallanish KORE 62% Fe index increased $1.17/tonne to $139.31/dry metric tonne cfr Qingdao, the highest since September last year. The Kallanish KORE 65% Fe index gained $1.17/t to $168.40/dmt cfr, and the KORE 58% Fe index grew $1.06/t to $110.78/dmt cfr.

On the Dalian Commodity Exchange, May iron ore settled up CNY 27/t at CNY 797.5/t ($125.25/t), while on the Singapore Exchange February 62% Fe futures settled up $9.16/t at $147.03/t. The same contract for 65% Fe and 58% Fe futures settled up $8.94/t at $177.19/t, and up $9/t at $114.97/t respectively. Tangshan billet increased CNY 20/t to CNY 4,500/t.

Across 35 ports, iron ore stocks dropped another 1.07 million tonnes to 149.02mt last week, according to SMM. Deliveries into ports have slowed sharply and are expected to remain low thanks to the holidays reducing port efficiency in the coming week.

Supply uncertainty was one reason for the higher spot and futures prices. Atlas Iron has reportedly been struggling with the negative impact to its shipments from labour shortages. Covid restrictions have made it increasingly difficult for miners to transport sufficient workers to their mines to maintain normal operations.

The key driver however remains growing expectations that the Chinese market will push steel prices higher in the coming weeks as demand recovers from a very weak H2 2021. This led to a surge in position taking in both iron ore and steel futures markets on Friday, the last trading day before the holiday for Chinese exchanges.

China is attempting to bring forward local government spending and is allowing developers greater access to funds. This could mean plenty of funding for construction once the weather and worker availability improves after the New Year holiday.