Lower grade iron ore prices are rallying

Adrian Dennis / AFP / Getty Images
  • Iron ore spot and futures markets traded mixed on Tuesday, continuing to consolidate upon recent gains.
  • The World Steel Association released its latest forecasts for global steel demand, predicting it will lift by 1.4% in 2019 after an expected 3.9% gain this year.
  • Chinese rebar and iron ore futures were quiet in overnight trade on Tuesday, providing few clues as to how spot markets will fare on Wednesday.

Iron ore spot and futures markets traded mixed on Tuesday, continuing to consolidate upon recent gains.

According to Metal Bulletin, the spot price for benchmark 62% fines dipped 0.2% to $71.50 a tonne, easing back from the multi-month high of $71.67 a tonne struck late last week.

Higher grades also softened with the price for 65% Brazilian fines dipping 0.1% to $97.20 a tonne.

Lower grades managed to buck the broader trend with the price for 58% fines lifting 0.8% to $41.61 a tonne, the highest level since March 8 this year.

The mixed performance from spot markets followed a pullback in Chinese steel futures on Tuesday.

Rebar futures in Shanghai settled at 4,117 yuan, giving back ground after hitting a one-month high of 4,167 yuan earlier in the session. The January 2019 previously closed Monday’s night session at 4,132 yuan.

The moderation in rebar futures flowed through bulk commodity contracts traded in Dalian with iron ore and coke futures settling at 507.5 yuan and 2,448.5 yuan respectively, down from 509 yuan and 2,469 yuan on Monday evening.

Coking coal futures were near-unchanged at 1,367.5 yuan.

There was little reaction to updated forecasts from the World Steel Association (worldsteel) that point to a continued improvement in steel demand in the year ahead.

“Global steel demand will reach 1,657.9 million tonnes in 2018, an increase of 3.9% over 2017,” the group said.

“In 2019, it is forecast that global steel demand will grow by 1.4% to reach 1,681.2 million tonnes.

worldsteel said whether its forecasts are mirrored in reality will largely come down to whether Chinese policymakers decide to stimulate the economy amidst an escalating trade war with the United States.

“Both downside and upside risks exist for China,” it said.

“Downside risks come from the ongoing trade friction with the US and a decelerating global economy.

“However, if the Chinese government decides to use stimulus measures to contain the potential slowdown of the Chinese economy in the face of a deteriorating economic environment, steel demand in 2019 will be boosted.”

Continuing the theme seen earlier in the day, coking coal futures continued to outperform in overnight trade on Tuesday, leading a modest increase across steel and other bulk commodity contracts.

SHFE Rebar ¥4,126 , -0.27%
DCE Iron Ore ¥509.00 , -0.20%
DCE Coking Coal ¥1,393.00 , 2.05%
DCE Coke ¥2,462.50 , -0.20%

With the exception of coking coal, the small movements provide few clues as to how spot markets will fare on Tuesday.

Trade in all Chinese commodity futures will resume at midday AEDT.

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