Iron ore just logged its largest decline in months

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  • Iron ore spot and futures markets went hard into reverse on Tuesday after scaling fresh multi-month peaks on Monday.
  • The slide followed the release of mixed Chinese economic data for April. Steel output was strong but property sales were weak.
  • Chinese iron ore and rebar futures continued to slide in overnight trade.

Iron ore markets fell heavily on Tuesday, giving back all of the gains achieved a session earlier.

According to Metal Bulletin, the spot price for benchmark 62% fines slumped 2.4% to $67.28 a tonne, the largest percentage decline since April 3.

Coincidentally, the decline was almost identical to the percentage gain recorded on Monday.

As seen in the chart below, while the overall trend is higher, the price action is choppy with large moves recorded in either direction.

Like the benchmark, both lower and higher grades fell on Tuesday.

Hit the hardest were 58% fines, tumbling 2.8% to $39.56 a tonne. Meanwhile 65% fines fared a little better, falling 1% to $86.30 a tonne.

The steep losses in spot markets followed a large reversal in Chinese iron ore futures earlier in the day.

After hitting a multi-month high of 494 yuan in early trade, the September 2018 iron ore contract in Dalian stumbled into the close, finishing the day session at 485.5 yuan.

Rebar futures in Shanghai followed a similar pattern, hitting a multi-week high earlier in the day before finishing near-flat at 3,681 yuan.

The reversal followed the release of mixed Chinese economic data on Tuesday.

According to Reuters calculations using data from China’s National Bureau of Statistics (NBS), average daily crude steel output at Chinese mills reached 2.56 million tonnes in April, the most since at least May 2014.

However, as steel output surged — underpinning demand for raw materials such as iron ore — downstream demand showed signs of slowing.

Separate data from the NBS revealed Chinese property sales by floor area fell 4.1% in April, the largest decline in six months. Between January to April, sales grew just 1.3%.

New construction starts also slowed sharply, potentially a sign that steel demand may soften into the Northern hemisphere summer.

As seen in the scoreboard below, both iron ore and rebar futures continued to weaken overnight, albeit not by any substantial degree.

SHFE Rebar ¥3,675 , -0.05%
DCE Iron Ore ¥484.00 , -0.62%

While the overnight moves in futures have not been the best guide of late, the modest declines suggest spot markets may start trade on a softer footing on Wednesday.

All Chinese commodity contracts will resume trade at 11am AEST.

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