Iron ore enters a bear market

Alexander Koerner/Getty Images

Iron ore spot markets were hammered again on Friday, continuing the bearish price action seen earlier in the week.

According to Metal Bulletin, the price for benchmark 62% fines slumped by 3.8% to $63.56 a tonne, leaving it at the lowest level since July 7.

It has now fallen 20.5% from the recent high of $79.93 a tonne struck on August 21, including in six of the past seven sessions, leaving it in a technical bear market.

A bear market is typically defined as a loss of 20% or more.

The weakness in the benchmark was seen across the grades.

The price for 58% fines slid by 2.2% to $38.69 a tonne while ore with 65% Fe content fell by a smaller 0.3% to $88.20 a tonne.

Yet again, the weakness in spot markets corresponded with another steep decline in Chinese commodity futures on Friday, including in iron ore and rebar futures.

Iron ore futures in Dalian finished Friday’s day session nursing a loss of 3.9%, closing at 466.5 yuan per tonne. Rebar futures in Shanghai were hit even harder, finishing down 4.5% at 3,554 yuan per tonne.

“Demand for iron ore is expected to weaken in winter because steel factories will cut production and iron ore supply will rise as global miners produce more during the last quarter of the year,” an unnamed trader in Jinan in China’s eastern Shandong province told Reuters.

Along with fundamentals, profit-taking from traders — whether voluntary or involuntary in nature — was another factor that probably contributed to the late slide in futures.

Providing no clear indication whether the weakness in iron ore spot markets will continue today, Chinese futures finished mixed on Friday evening with rebar inching higher while iron ore continued to fall.

Here’s the final scoreboard.

SHFE Rebar ¥3,578 , -0.56%
DCE Iron Ore ¥461.00 , -1.71%
DCE Coking Coal ¥1,171.00 , -3.70%
DCE Coke ¥1,996.00 , -3.22%

Trade in Chinese futures will resume at 11am AEST.

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