Iron ore spot markets weakened on Tuesday, mirroring a late slump in Chinese futures.
And while declines were across the board, they were particularly severe for lower grade ores.
According to Metal Bulletin, the spot price for benchmark 62% fines slid 1.88% to $62 a tonne, the largest one-day decline since May 8. The weakness coincided with a sharp slump in Chinese futures earlier in the session with the September 2017 contract on the Dalian Commodities Exchange tumbling over 3% into the close.
While a large decline in the benchmark price, it was dwarfed by those seen in lower grade ores.
Indeed, the price for 58% fines tumbled 3.36%, finishing the session at $41.12 a tonne.
Analysts at Metal Bulletin said the weakness followed a drop in Chinese steel prices after several days of gains.
“China’s spot rebar prices drop slightly on Tuesday as futures withdrew after several days of gains. The price decrease in the paper market led to thinner trading in the spot rebar market, which put pressure on prices,” the group said.
“Buyers, having procured materials a day earlier, withdrew to the sidelines to see how prices trend over the next few days.”
Some suggested that the move in futures was driven by speculative forces, and not reflective of fundamentals.
“I don’t think the movements in futures reflect the fundamentals of the market,” an unnamed Shanghai-based trader told Reuters.
“In the physical market, there are some expectations that steel demand will be firm after the summer, given declining inventories.”
Providing little indication as to what direction iron ore and rebar spot markets will travel on Wednesday, Chinese commodity futures finished overnight trade largely unchanged from Tuesday’s closing level.
The September 2017 iron ore future in Dalian finished down 2.35% at 478 yuan, marginally below Tuesday’s day session close of 479 yuan.
Rebar futures were also largely unchanged, closing trade down 0.57% at 3,301 yuan.
SHFE Rebar ¥3,301 , -0.57%
DCE Iron Ore ¥478.00 , -2.35%
DCE Coking Coal ¥1,062.50 , 0.52%
DCE Coke ¥1,577.00 , 0.41%
Trade in Chinese commodity futures will resume at 11am AEST.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.