Chinese iron ore futures are getting hosed again

Photo by Ulet Ifansasti/Getty Images
  • Iron ore futures have fallen heavily upon the resumption of trade on Monday.
  • The May 2018 contract in Dalian has lost over 15% since mid-January, leaving it at the lowest level since November last year.
  • Analysts put the selloff down to new US tariffs on steel imports and growing stockpiles of Chinese steel product inventory.

Iron ore futures in China are still getting hosed, adding to the steep declines seen on Friday.

Here’s the scoreboard as at 12.20pm in Beijing.

SHFE Rebar ¥3,705 , -0.88%
DCE Iron Ore ¥477.50 , -2.95%
DCE Coking Coal ¥1,293.00 , -1.82%
DCE Coke ¥2,013.00 , -3.17%

After closing Friday’s night session at 486.50 yuan a tonne, the May 2018 iron ore contract has fallen even further in early trade on Monday, hitting a low of 475.5 yuan a tonne, the weakest level since November 20 last year.

It currently trades at 477.5 yuan a tonne, leaving its fall from mid-January at over 15%.

May 2018 Iron Ore Contract. Source: Thomson Reuters.

Other raw steel making ingredients are also under pressure with coke and coking coal contracts in Dalian off 3.17% and 1.82% respectively.

Rebar futures in Shanghai have also reversed much of the bounce recorded on Friday evening, sitting down 0.88% at 3,705 yuan a tonne.

Analysts at ANZ Bank put the continued slide in steel and bulk commodity prices down to concerns over the recent introduction of tariffs on US steel imports, along with growing steel and iron ore inventories in China.

“Steel prices in China fell sharply on the news that US President Trump had signed the order to apply 25% tariffs on steel imported into the US,” the bank said, referring to the slide in spot and futures markets on Friday.

“This weakness was exacerbated by data showing that inventories in China rose.

“Stockpiles of rebar have more than tripled since December to 9.64 million tonnes, according to SteelHome data. This is the highest since 2013.

“This all weighed on iron ore, with futures being sold heavily around Asia.”

Based on the early price action on Monday, it looks like that those factors are continuing to weigh.

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