The iron ore price was hammered on Tuesday, slumping more than 4% amidst signs that Chinese steel production is slowing.
According to Metal Bulletin, the spot price for benchmark 62% fines fell by 4.42%, to $2.34, to $50.57 a tonne, trimming its year to date gain to 16.1%.
It was the largest percentage decline since May 23.
“The iron ore spot market took a hit today following the release of NBS data showing a retreat in Chinese crude steel output last month,” said analysts at Metal Bulletin.
“China produced 70.5 million tonnes of crude steel last month, the National Bureau of Statistics (NBS) disclosed, which translates to an average production rate of 2.274 million tpd [tonnes per day]. This is down 1.7% from April’s all-time high of 2.314 million tpd.”
Suggesting that demand for steel product in China may also be slowing, Metal Bulletin notes that steel prices at major Chinese producers have also been reduced.
“Central China’s Wuhan Iron & Steel announced cuts of 180-200 yuan ($27 -30) per tonne to its list prices for July-delivery mainstream flat products. This follows a similar move by eastern China’s Baosteel a day earlier,” it said.
The weakness in the spot iron ore price looks like it may extend into a second consecutive session with Chinese futures falling heavily in overnight trade.
The most actively traded September 2016 iron ore future on the Dalian Commodities Exchange slumped by 2.05%, closing the session at 358 yuan.
Linking the weakness back to decline in spot steel markets, Chinese rebar and coking coal futures traded on the Shanghai and Dalian exchanges fell by 2.45% and 2.17% respectively.
Trade in all three contracts will resume at 11am AEST.