Iron ore spot markets were hosed on Friday, tumbling upon the resumption of trade following the week-long Lunar New Year holiday.
And Chinese futures, responsible for the weakness seen in spot and physical markets, continued to slide on Friday evening, hinting that the selloff may have further to run yet.
According to Metal Bulletin, the spot price for benchmark 62% fines tumbled by 1.38% to $82.19 a tonne, marking the first movement in the index since January 26.
Year-to-date it has risen 4.2%.
Both higher and lower grade ores also declined with the steepest losses recorded for the latter.
Analysts at Metal Bulletin said that a selloff in Chinese rebar futures, seemingly the catalyst for broader losses in other contracts, may have been as a result of burgeoning inventory levels.
“Futures experienced a sharp drop on the first trading day after the Chinese New Year holiday amid high inventories of billet and rebar,” it said.
The slump also coincided with news that the People’s Bank of China had moved to tighten monetary conditions, lifting interest rates for its open market operations and standard lending facility on Friday.
Whatever the catalyst, futures continued to slide in overnight trade on Friday, suggesting that further weakness in spot and physical markets may continue on Monday.
The May 2017 iron ore future on the Dalian Commodities Exchange slid 2.88% to 608 yuan, mirroring a similar fall in rebar futures traded on the Shanghai Futures Exchange which closed down 2.68% at 3089 yuan.
Trade in Chinese commodity futures will resume at Midday AEDT.
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