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Iron ore is falling fast

Alex Caparros/Getty Images

The spot iron ore price fell for a fifth consecutive session on Monday, taking the price back towards the levels it was trading at before last Monday’s record breaking surge.

According to Metal Bulletin, the spot price for benchmark 62% fines fell by 2.7%, or $1.54, to $55.55 a tonne, taking the decline for the past five sessions to 12.85%.

Amidst thin trade, analysts at Metal Bulletin pinned the continued weakness on yet another decline in Chinese steel prices.

“China’s spot rebar market continued to fall on today, as billet prices continued to cede more ground, resulting in a withdrawal of downstream buyers,” said Metal Bulletin in its overnight report. “In both east and north China, market participants were taking a wait-and-see approach to the market during the day after the price of billet in Tangshan slumped further over the weekend.”

While the swings of late have been wild, and largely disconnected with movements in the spot price, Chinese iron ore and steel futures continued to weaken in overnight trade, suggesting that further weakness in the spot iron ore price may arrive today.

The most actively traded May 2016 future on the Dalian Commodities Exchange fell by 1.96% to 425.5 yuan, taking the decline from the high of March 9 to 9%.

That decline was mirrored in rebar futures on the Shanghai Futures Exchange, which fell 1.82% to 2,049 yuan.

On Monday Chinese iron ore futures endured a wild day session of trade, jumping as much as 4.5% before sinking into the close. The movements mirrored those seen in Chinese stocks, indicating that more speculative, less sophisticated investors may now be participating in the market.

Yesterday the Dalian exchange upped the commission fee for intraday trading in iron ore futures to 0.006% of the turnover value, doubling the level previously offered to investors that opened and closed trades in any single trading session.

Whether this change will reduced the wild swings seen in recent weeks is yet to be determined.

Both iron ore and rebar futures will resume trade at 12pm AEDT.

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