Iron ore is getting smashed

Photo by Cameron Spencer/Getty Images

The iron ore rout resumed with a vengeance on Thursday with spot and futures markets tumbling across the board.

The price for benchmark 62% fines slumped 5.1% to $66.09 a tonne, according to Metal Bulletin, leaving it at the lowest level since July 17.

At 5.1%, the percentage decline was also the largest since May 5, extending the drop over the last six sessions to 13.7%.

The weakness in the benchmark was mirrored across both higher and lower grade ores.

58% fines were smacked, sliding 6.8% to $39.58 a tonne. Ore with 65% Fe content also came under pressure, falling 4.9% to $88.50 a tonne. Like the benchmark, they too sit at multi-month lows.

The slide in spot markets coincided with another late plunge in Chinese rebar and iron ore futures.

Rebar futures in Shanghai lost 2.4%, finishing trade at 3,655 yuan a tonne. Iron ore futures in Dalian fell by an even greater margin, losing 4.7% to 472 yuan a tonne.

The latter is now down 22.6% since August 22, leaving it in a technical bear market.

There was no definitive factor to explain the size of the slide in spot and futures markets on Thursday, although upcoming curbs on steel production in China — potentially limiting demand for iron ore — may partially explain its recent slide.

It must be noted that iron ore plunged heading into the end of the June quarter of this year as steel mills prioritised paying off quarterly debts rather than procuring additional iron ore.

Given it’s nearing the end of the September quarter, this again could be a factor.

Providing few clues as to whether the rout in iron ore markets will continue today, Chinese futures closed largely unchanged in overnight trade.

The January 2018 contract finished at 471 yuan a tonne, one yuan below Thursday’s day session close. Rebar futures sold off a little more, finishing at 3,637 yuan a tonne.

SHFE Rebar ¥3,637 , -2.31%
DCE Iron Ore ¥471.00 , -2.99%
DCE Coking Coal ¥1,220.00 , -4.13%
DCE Coke ¥2,076.00 , -3.35%

Trade in Chinese commodity futures will resume at 11am AEST.

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