Iron ore got thumped again on Wednesday, following the weak lead provided by Chinese futures earlier in the session.
And it looks like the selling isn’t finished yet.
The spot price for benchmark 62% fines tumbled by 6.8% to $72.08 a tonne, according to Metal Bulletin, taking its decline over the past two sessions to an enormous 10.8%.
That’s the largest two-day percentage decline seen since July 2015, and has trimmed its 2016 gain to 65.4%.
Prices for lower and higher grade ore were also hammered, albeit to a lesser degree than benchmark ore.
What goes up must come down, as shown in the chart below.
And it looks like there’s further declines to come.
Dalian futures were weaker again overnight, continuing to unwind after hitting a multi-year high on Monday.
The May 2017 contract finished the session down 1.94% to 555 yuan. There were also similar declines recorded in rebar and coking coal.
However, as the scoreboard reveals, the decline was significantly less than those seen in recent days, with some base metals contracts rallying over the session.
- SHFE Copper ¥47,300 , 1.90%
- SHFE Aluminium ¥13,450 , 0.67%
- SHFE Zinc ¥22,555 , -1.93%
- SHFE Nickel ¥92,840 , 0.43%
- SHFE Rebar ¥3,020 , -0.66%
- DCE Iron Ore ¥555.00 , -1.94%
- DCE Coking Coal ¥1,287.50 , -1.57%
- DCE Coke ¥1,750.50 , -2.80%
Whether this indicates that the selloff in iron ore may be coming to an end, or will potentially reverse, will likely be determined by the early price action on Thursday when trade gets underway at Midday AEDT.
As for the reason behind the selling, analysts have cited everything from reduced money market liquidity, tighter trading restrictions and technical selling.
While that may be true to some degree, the main factor driving the price action, as was the case when it was moving higher, remains heightened levels of speculation.