Iron ore markets fell heavily on Monday, dragged lower once again by weakness in Chinese steel prices.
According to Metal Bulletin, the spot price for benchmark 62% fines tumbled 3.27% to $55.90 a tonne, completely reversing a similarly-sized surge on Friday.
It has now fallen 29.1% this year, leaving it sitting at the lowest level since October 10, 2016.
The weakness in the benchmark was replicated across the board with prices for higher and lower grade ores also softening during the session.
The price for 58% fines fell by a smaller 1.64%, finishing the session at $38.90 a tonne.
After disconnecting from movements in steel prices on Friday, analysts at Metal Bulletin said that the latest plunge mirrored further weakness in Chinese steel markets.
“The iron ore market shifted downwards today as the slight gains seen at the back end of last week proved unsustainable,” the group said.
“The rate of descent in China’s spot rebar prices picked up on Monday as the futures and billet markets continued to soften. Billet prices decreased sharply over the weekend while rebar futures also weakened during the day. Together, these weighed heavily on spot rebar prices.”
And given the ugly price action in Chinese rebar futures overnight, it suggests that there may be further downside to come for iron ore spot markets, particularly should the recent relationship between the two be maintained.
The most actively traded October 2017 rebar future closed down 2.01% to 2,929 yuan per tonne, according to pricing from the Shanghai Futures Exchange, extending its decline from the high of May 22 to 13.5%.
Despite the weakness in rebar futures, it wasn’t enough to deter modest buying in iron ore futures on the Dalian Commodities Exchange.
The September 2017 contract finished up 0.11% at 436 yuan per tonne, around the same levels as Monday’s day session close. Despite the gain, it too has fallen over 13% from the highs of May 22, underlining the strong relationship between iron ore and rebar futures over recent weeks.
Coking coal and coke futures also found a bid, lifting 1.26% and 0.46% respectively.
Trade in Chinese commodity futures will resume at 11am AEST.