Iron ore futures are getting smoked

David Giesbrecht/USA Network/NBCU Photo Bank via Getty Images)
  • Iron ore futures have fallen over 18% since January, including more than 4% today.
  • Rebar and other bulk commodity contracts are also nursing heavy losses.
  • Concern about the outlook for Chinese steel demand, along with bloated Chinese iron ore port inventories, are being cited as two catalysts behind the recent selloff.

Iron ore futures are getting hosed again, tumbling to the lowest levels since mid-November in recent trade.

Here’s the scoreboard as at 2pm AEDT.

SHFE Rebar ¥3,646 , -2.44%
DCE Iron Ore ¥463.50 , -4.33%
DCE Coking Coal ¥1,265.00 , -1.67%
DCE Coke ¥1,934.00 , -2.94%

The May 2018 contract in Dalian is currently down more that 4% at 363.5 yuan a tonne, extending its slide from January this year to over 18%.

It is now quickly encroaching on a decline of 20%, defined as a technical bear market.

Dalian Iron Ore May 2018 Contract. Source: Thomson Reuters.

The continued slide follows news that iron ore inventories held at Chinese ports jumped to 159.18 million tonnes, up 600,000 tonnes on a week earlier.

In absolute terms, that is the highest level on record.

“Iron ore prices [are falling] on physical demand concerns after Chinese policymakers told steel mills in the Wu’an area of the Hebei province to halt production until March 31,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank, in a note released today.

Along with souring sentiment towards the outlook for iron ore demand, Dhar says renewed pessimism over steel demand also contributed to the weakness across the complex.

“Steel demand concerns, driven by the sharp rise in steel rebar stockpiles, also weighs on iron ore markets,” he said.

“Cold weather has stalled China’s construction season this year, but we think construction could fundamentally weaken in 2018 on the back of a weaker property sector.”

Reflecting that view, rebar futures traded separately in Shanghai have skidded 2.44% to 3,646 yuan a tonne in recent trade, leaving the decline from the start of the month at around 10%,

Coking coal and coke futures are also having a session to forget, losing 1.7% and 3% respectively.

Like iron ore, that likely reflects deepening concern about the outlook for Chinese steel consumption, and as a consequence the demand outlook for steel’s raw ingredients.