Volatility in iron ore markets has suddenly spiked

Atsushi Tomura/Getty Images for FIVB
  • Iron ore spot markets fell sharply on Friday, completely unwinding all of Thursday’s gains.
  • Chinese rebar and iron ore futures also fell, the latter recording its largest weekly decline in two months.
  • Futures were largely unchanged on Friday evening, proving few clues as to whether the weakness in spot markets will persist on Monday.

After recording its largest gain in over a month on Thursday, the benchmark iron ore spot price followed up that move with an even larger decline on Friday.

According to Metal Bulletin, the spot price for benchmark 62% fines slumped 3.7% to $63.94 a tonne, reversing all of Thursday’s 3.5% gain.

It was the largest percentage decline since April 3 and left the benchmark sitting at the lowest level since April 16.

As seen in the chart below, the price action has been wild recently.

Like the benchmark, declines were recorded across lower and higher grades, albeit smaller in size.

58% fines fell 0.9% to $37.72 a tonne. 65% fines fared even better, settling down 0.7% at $83.40 a tonne.

The weakness in spot markets mirrored a similar performance from Chinese steel and iron ore futures on Friday.

Rebar futures in Shanghai finished at 3,565 yuan, down from Thursday’s night session close of 3,606 yuan.

Dalian iron ore was also under pressure, finishing at 454.5 yuan, well of the 462 yuan level it closed Thursday’s night session. Combined with prior weakness, it was the largest weekly percentage drop in in two months.

A lift in Chinese iron ore port inventories last week may have contributed to the renewed bout of price weakness.

“According to Steelhome data, iron ore stockpiles at Chinese ports rose 1% to 160.6 million tonnes last week,” ANZ analysts said in a note.
“This stoked fears that the continued strength in iron ore imports into China would add to this oversupply.”

Providing few clues as to whether the weakness in spot markets will extend into Monday’s trading session, Chinese rebar and iron ore futures were largely static in overnight trade on Friday.

Here’s the final scoreboard.

SHFE Rebar ¥3,577 , -0.20%
DCE Iron Ore ¥454.00 , -0.87%
DCE Coking Coal ¥1,182.50 , -0.88%
DCE Coke ¥1,990.50 , -0.62%

Trade in Chinese futures will resume at 11am AEST.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.