Iron ore prices surged on Wednesday on signs the Chinese economy continues to pick up pace and Vale, the top miner of the steelmaking raw material announced an output halt.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $123.47 a tonne on Wednesday, up 5% from Tuesday’s peg.

Iron ore is up 34% this year after hitting its highest level since mid-January 2014 a fortnight ago.

Brazil plant halted

Vale said in a filing on Monday it is temporarily suspending operations at its Viga concentration plant following a court order, taking 11,000 tonnes of fines per day off the market. The Viga mine has not been affected. 

“The supply disruption could provide short-term support to the market, which has eased from the six-year highs earlier this month,” commodity strategists at ING said in a note quoted by Reuters.

Such support may wane towards the end of the year as worries about supply ease.

The country’s port inventories hit a six-month high, and according to Reuters, analysts at OCBC Bank in Singapore expect iron ore shipments from Australia and Brazil to exceed 100 million tonnes in September.

China’s iron ore purchases in August totalled just under 95m tonnes, up 4.2% from July and 6.2% from last year, customs data showed, marking the highest level of imports since January 2018. 

Iron ore imports are set to reach another record in 2020, with annualized shipments running at 1.12 billion tonnes.

Chinese construction boom

While a key measure of China’s construction activity (PMI) remained flat at 60.2 (a reading above 50 indicates expansion) in September, business expectations in the sector jumped to a 22 month high of 67.8. 

The country’s manufacturing PMI also came in above expectations to a more than two-year high of 51.5, which boosted the copper price on Wednesday.

In a note, BMO Capital Markets said the Chinese economic recovery “has certainly picked up pace, with both supply and demand improving, especially out of the private sector which had been lagging SOEs in the recovery cycle, while the sharp rise in overseas demand certainly complemented the domestic market.”

China produces more steel than the rest of the world combined and imports more than 70% of the world’s seaborne iron ore.