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Iron ore bounces after several days of heavy losses

Photo by Junko Kimura/Getty Images

Iron ore spot markets bounced on Tuesday following several days of heavy losses.

According to Metal Bulletin, the price for benchmark 62% fines jumped 3% to $64.95 a tonne, its largest one-day percentage increase since August 31.

It had fallen 12.6% over the past seven sessions.

Like the benchmark, both higher and lower grade ores finished higher for the session.

Ore with 65% Fe content rose 2.5% to $89.50 a tonne while 58% fines added a smaller 0.8%, settling trade at $39.30 a tonne.

The rebound in spot markets followed a lift in Chinese rebar futures during the session.

The January 2018 contract in Shanghai rose 0.87% to 3,614 yuan a tonne, finding short-term support after tumbling more than 13% from the multi-year highs seen earlier in the month.

Iron ore futures in Dalian went the other direction, finishing the session down 0.32% at 464.50 yuan a tonne.

“Very little has changed in the fundamental outlook for the market, but steel mills have started offering bargain prices, spurring some physical demand and supporting prices,” Richard Lu, a steel consultant at CRU in Beijing, told Reuters.

Lu said that some end-of-quarter window dressing had also helped support prices ahead of the week-long Chinese national holiday from October 1.

Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, agrees with Lu’s assessment, putting the bounce in iron ore spot markets down to “opportunistic buying”.

“Buyers reentered the market on views that prices have likely bottomed in the near term,” he said in his morning note.

“Before yesterday, iron ore prices had declined 20% since September 5.

Looking ahead, Dhar says that high steel margins will likely provide some support for iron ore prices in coming weeks. However, he cautions that is unlikely to support prices longer-term.

“We expect that support to fade later this year when authorities enact anti-pollution measures that will constrain China’s spare steel capacity. That will hurt iron ore demand,” he says.

Providing an early indication that the rebound seen on Tuesday may extend into Wednesday’s trading session, rebar and iron ore futures continued to inch higher in overnight trade.

Here’s the final scoreboard from Tuesday’s night session.

SHFE Rebar ¥3,638 , 0.61%
DCE Iron Ore ¥470.00 , 0.43%
DCE Coking Coal ¥1,177.00 , -0.08%
DCE Coke ¥2,018.50 , -0.20%

Chinese commodity futures will resume trade at 11am AEST.

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