Iron ore fell again following a late plunge in Chinese futures

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Iron ore spot markets came under pressure on Tuesday, moving lower in line with a late plunge in Chinese futures.

According to Metal Bulletin, the spot price for benchmark 62% fines fell by 1.65% to $63.23 a tonne, registering its first back-to-back drop since early June.


Both higher and lower grades also weakened during the session.

Brazilian ore with 65% Fe content dropped 0.9% to $80 a tonne, while the price for 58% fines slid 1.4% to $44.08 a tonne.

The selloff coincided with a plunge in iron ore futures on Tuesday, seeing the most actively traded September 2017 contract tumble close to 3% having hit a six-week high earlier in the session.

That move mirrored similar reversals in rebar and coal futures on Tuesday.

However, as soon as it began, that weakness was subsequently reversed in overnight trade with rebar and bulk commodity contracts closing well above the lows struck earlier in the session.

Here’s the final scoreboard.

SHFE Rebar ¥3,444 , 1.50%
DCE Iron Ore ¥477.50 , -0.10%
DCE Coking Coal ¥1,142.00 , 1.56%
DCE Coke ¥1,786.50 , 0.62%

Of note, the most actively traded October 2017 rebar contract closed at the highest level since March 16 amid reports of further steel mill closures in China.

According to Reuters, the Hebei province, the top steel-producing region in the nation, will slash 11.48 million tonnes in outdated capacity to accommodate the expansion of a new plant, continuing the government’s push to eliminate outdated and inefficient producers.

Hebei has previously pledged to cut its annual steel production capacity to less than 200 million tonnes by the end of 2020, down from 286 million tonnes some four years ago.

Tight supply of rebar inventory, along with a surge in open interest in rebar futures contracts, suggests a combination of fundamentals and speculative forces have contributed to the recent push higher.

Earlier this week, Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, said that as long as Chinese steel mill margins remained elevated, it will likely underpin prices for iron ore.

“We continue to see the iron ore rally gaining momentum in the short run as Chinese steel mill margins continue to remain elevated,” he said.

Trade in Chinese commodity futures will resume at 11am AEST.