Iron ore markets stabilise after a drubbing earlier in the week

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Iron ore spot markets finished mixed on Wednesday with a rebound in the benchmark masking continued weakness across higher and lower grade ores.

According to Metal Bulletin, the price for benchmark 62% fines increased by 1.2% to $69.65 a tonne, recovering around a quarter of the 4% plus slide seen on Tuesday.

It was the first increase in the benchmark in five sessions, snapping a 10% losing streak in the process.

However, despite the modest recovery in the benchmark, that did not extent to higher and lower grade ores which continued to slide.

58% fines and ore with 65% Fe content both fell 0.4%, ending the session at $42.45 a tonne and $93.10 a tonne respectively.

“After fuelling a rally in prices through the month of August, steel production cuts are now perceived as a downside for raw materials, as steel inventories have risen and steel prices have started to turn,” said analysts from Macquarie Bank in a note released this week.

“Profitability remains exceptionally good, but more mills in our survey have indicated their intention to reduce spot purchases of raw materials in the very near term, as they expect restrictions to steel production to lead to further price falls over the next two weeks.”

The implementation of steel production cuts on environmental grounds, potentially limiting demand for less-efficient lower grade iron ore, along with a small increase in steel inventories following records-breaking production levels in recent months, may explain why Chinese futures continued to slide on Wednesday.

Dalian iron ore futures closed the day session at 492.50 yuan per tonne, while rebar futures in Shanghai finished at 3,758 yuan per tonne.

Both contracts finished below Tuesday’s night session close.

And, as seen in the scoreboard below, those losses were maintained in overnight trade with iron ore and rebar futures edging lower during the session.

SHFE Rebar ¥3,755 , 0.24%
DCE Iron Ore ¥491.50 , -0.81%
DCE Coking Coal ¥1,299.00 , 1.13%
DCE Coke ¥2,173.50 , 0.67%

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

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