The iron ore price continued to unravel on Wednesday, falling heavily for the fourth day in succession.
According to Metal Bulletin, the spot price for benchmark 62% fines fell 2.7%, or $1.69, to $61.09 a tonne. The price now sits at the lowest level seen since April 18, and takes the percentage decline since April 21 to 13.3%.
Year to date the price gain has now been trimmed to 40.2%.
It’s been a wild ride for the price of late, as shown in the chart below. The price movements have become so chaotic in recent months — due to a number of factors including a surge in speculative activity in Chinese iron ore futures — that the chart should come with a health warning for those suffering vertigo.
Providing no indication that the spot price slide will end today, Chinese iron ore futures were hammered again in overnight trade, slipping by a further 1.93% to 432.5 yuan.
There was also a similar decline in coking coal futures which slid 2.01%.
While increased margin requirements and exchange fees for Chinese futures trading have no doubt contributed to the substantial price declines, helping to unwind some of the speculative positioning that had been building up in recent weeks, it’s also noteworthy that curbs on steel production in Tangshan — a major steel producing city — have now come into effect before the opening of a highly publicised horticultural exposition on Friday.
Along with low steel inventories and and a ramping up of construction activity in March, many believe that mills bringing forward steel production before the exposition began contributed to the enormous gains in iron ore and coking coal prices seen in recent months.