Iron ore markets had a quiet start to the week -- things have changed

Photo: Martin Steinthaler / Hoch Zwei / Getty Images

It was a slow start to the week for iron ore markets with modest moves seen in both spot and futures markets on Monday.

Things have changed on Tuesday.

Out of nowhere, iron ore futures in China have tumbled, falling as much as 4.5% at one point during the session.

As seen in the scoreboard below as at 2.30pm AEDT, the May 2018 contract in Dalian is currently down 4.3% at 519.50 yuan.

SHFE Rebar ¥3,886 , -1.35%
DCE Iron Ore ¥519.50 , -4.33%
DCE Coking Coal ¥1,262.50 , -2.06%
DCE Coke ¥1,974.00 , -1.82%

Analysts at ANZ Bank put modest weakness in futures overnight — perhaps a precursor to what’s been seen today — down to diminished restocking demand from steel mills.

“Futures prices in China failed to gain any traction as traders failed to follow through with purchases following the strong close last week,” the bank said.

“This suggests that the restocking activity we saw emerge last week looks relatively weak.”

It added that data from China’s National Bureau of Statistics (NBS) released on Monday revealed Chinese iron ore output increased slightly in December, rising 0.9% year-on-year to 109.2 million tonnes.

Rebar, coking coal and coke contracts have also fallen from earlier highs, hinting the plunge in iron ore may be due to souring sentiment towards steel prices rather than iron ore specifically.

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