Iron ore spot markets fell for a fourth consecutive session on Wednesday, dragged lower by continued weakness in steel prices.
However, Chinese futures ripped higher overnight, so it looks like the losing streak will come to an end on Thursday.
According to Metal Bulletin, the spot price for benchmark 62% fines fell by a further 1% to $72.97 a tonne, extending its losses over the past four sessions to 4.8%.
Ore with 65% Fe content fell by a smaller 0.2% to $92.90 a tonne, while 58% fines held steady at $49.02 a tonne.
The weakness coincided with another slide in Chinese rebar futures during the session, continuing the move that began late last week following moves from the Shanghai Futures Exchange to curb speculative forces that had been building in steel prices.
The January 2018 rebar contract finished Wednesday’s day session down 1.04% at 3,707 yuan per tonne, taking its decline from the highs of Thursday last week to 8%.
That likely weighed on iron ore spot prices as a consequence.
However, after such a large decline in a relatively short period of time, Chinese commodity futures changed course in overnight trade, soaring in Wednesday’s night session.
Here’s the final scoreboard.
SHFE Rebar ¥3,783 , 1.42%
DCE Iron Ore ¥547.50 , 4.29%
DCE Coking Coal ¥1,414.00 , 4.90%
DCE Coke ¥2,200.50 , 3.85%
Some fairly significant moves, particularly for iron ore futures in Dalian which wiped out much of the losses seen in the past few days.
The latest surge coincided with the release of Chinese iron ore output figures for July, revealing a drop of 0.2% to 114.66 million tonnes despite strength in prices over the same period.
Sentiment may have also been boosted by news that the Chinese province of Hebei pledged to complete its annual steel capacity cuts for this year by the end of September. The province is aiming to cut steel capacity by 31.86 million tonnes this year, accounting for close to two-thirds of the nation’s total steel capacity reduction target.
Whether the gains in rebar, iron ore and coal futures were driven by those factors, or merely a renewed bout of speculative buying following several days of steep losses, remains unclear.
The only thing that is certain is that the gains were massive, pointing to the likelihood that spot iron ore markets will likely bounce today should futures markets maintain or build upon those gains today.
We’ll find out that answer when trade resumes in Chinese commodity futures at 11am AEST.