Iron ore skids to a 3-month low

Getty Images.
  • Iron ore spot markets suffered the largest fall so far this year on Friday.
  • The benchmark price now sits at the lowest level since mid-December and has lost over 13% since the end of February.
  • Futures markets stabilised in overnight trade on Friday.

Iron ore spot markets were hammered lower on Friday, logging the largest percentage decline so far this year.

According to Metal Bulletin, the price for benchmark 62% fines skidded 4.3% to $70.09 a tonne, the largest one-day percentage decline since December 27 last year.

In now sit at the lowest level since mid-December, losing a massive 13.3% since the start of March.

The losses in the benchmark were mirrored across the grades.

Ore with 65% Fe content fell 3.3% to $86.80 a tonne, outpacing a smaller decline for 58% fines which slid 3% to $40.53 a tonne.

The steep losses mirrored an equally ugly session for Chinese rebar and iron ore futures on Friday.

The May 2018 rebar contract in Shanghai slumped 3.7% to 3,709 yuan a tonne, recovering slightly after tumbling to as low as 3,663 yuan a tonne at one point during the session.

Iron ore futures in Dalian were hit even harder, sliding 5.2% to close at 483.5 yuan a tonne. At one point the May 20148 contract hit 481 yuan a tonne, the lowest level since late November.

The steel-led weakness also flowed through to coke and coking coal contracts which fell 3.1% and 4.7% respectively.

Analysts were split as to whether domestic factors in China or concern about the introduction of new tariffs on US steel imports was behind the slide on Friday.

“What worries the whole market and investors is what if this is just a beginning? Other countries can implement counter-policies that can make things worse,” CLSA analyst Daniel Meng told Reuters, referring to potential for new tariffs on US steel and aluminium imports to spark similar responses from other major trade nations.

Others, such as Helen Lau, analyst at Argonaut Securities, said ongoing concern about Chinese steel demand was another factor contributing to the selloff on Friday.

“People are also jittery about demand after March,” Lau told Reuters. “[Steel] inventory has built up quite fast and after March a lot of construction activity will resume, so if demand is slower than expectations, there will be further pressure on prices.”

Data from SteelHome Consultancy revealed rebar inventory rose to 7.13 million tonnes in late February, the highest level since March 2017. Separate figures from Mysteel consultancy put steel inventory held by Chinese traders even higher, sitting at 10 million tonnes as at the start of March.

Whatever the reason — be it global trade concerns or domestic considerations — the slide in Chinese commodity futures paused on Friday night.

Here’s the final scoreboard from Friday’s night session.

SHFE Rebar ¥3,721 , -0.45%
DCE Iron Ore ¥486.50 , -1.12%
DCE Coking Coal ¥1,295.50 , -1.63%
DCE Coke ¥2,063.50 , -0.75%

Both rebar and iron ore futures settled above Friday’s day session close, hinting that the steep losses seen in spot markets may not continue today.

That signal carries the disclaimer that the price action in overnight trade — often based off significantly lower volumes — has not been the most reliable indicator in recent times.

The rebound in rebar futures coincided with news that Tangshan, China’s largest individual centre for steel output, will extend production restrictions on steel production until November 14, beyond the March 15 date originally slated by policymakers.

Trade in Chinese commodity futures will resume at midday AEDT.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.