Whatever China’s legion of iron ore traders got up to during the Dragon Boat Festival holiday, it seems to have made them unhappy.
Continuing where they left off last week, they took a hammer to futures upon the resumption of trade today, leaving not only iron ore but other contracts such as coking coal and rebar sharply lower.
Here’s the final scoreboard.
SHFE Rebar ¥3,095 , -3.64%
DCE Iron Ore ¥424.50 , -5.98%
DCE Coking Coal ¥949.00 , -8.97%
DCE Coke ¥1,426.50 , -7.64%
Ouch. Yet another smoking, merely delayed by a four-day break.
At 424.5 yuan, the most actively-traded September 2017 iron ore future closed at lows not seen since November 3 last year, extending its drop from early March to 38%.
Coking coal futures were also pummeled, closing limit down 9% for the session. If not for market rules preventing a larger decline, who knows how big it could have been.
Making the decline all the more unusual, it’s coincided with the release of a raft of strong Chinese economic data, including signs of an acceleration in activity across the nation’s steel industry.
According to the government, China’s Steel Industry Purchasing Managers Index (PMI) surged to 54.8 in May, a sharp recovery on the 49.1 level of April.
The PMI measures changes in activity levels across China’s steel industry from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.
That indicates that activity levels improved sharply in May, led by an enormous surge in new domestic orders which grew at the fastest pace in over six months.
And in the separate non-manufacturing PMI also released the government, the subindex measuring activity levels across the construction sector — a major source of demand for steel — continued to grow at a breakneck pace.
That’s clearly not been enough to lift sentiment among futures traders, at least on Wednesday.