Iron ore prices slip as China's largest listed steelmaker says demand has already peaked

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  • Iron ore spot markets traded mixed on Thursday with modest gains in lower and higher grades masking continued weakness in the benchmark.
  • Baosteel, China’s largest listed steelmaker, believes Chinese iron ore demand has already peaked.
  • Chinese steel and bulk commodity futures finished moderately higher in overnight trade on Thursday.

The benchmark iron ore spot price fell for a second consecutive session on Thursday, continuing to weaken after hitting a multi-month high earlier in the week.

According to Metal Bulletin, the price for 62% fines slipped 0.4% to $69.18 a tonne, adding to the 0.5% drop seen a day earlier.

It briefly hit $69.82 a tonne on Wednesday, leaving it at the highest level since March 16.

While the benchmark spot price continued to ease, both lower and higher grade ores pushed higher for the session.

The price of 58% fines added 0.1% to $39.67 a tonne while the price for 65% Brazilian fines rose 0.2% to settle at $96.80 a tonne.

The mixed price performance followed renewed weakness in Chinese rebar futures which fell for the first time in five trading sessions.

According to data from the Shanghai Futures Exchange, the most actively traded January 2019 contract finished the session at 4,124 yuan, down from the recent peak of 4,205 yuan struck on Tuesday.

The weakness in steel futures flowed through to bulk commodity contracts traded separately in Dalian with iron ore, coking coal and coke finishing the session at 502, 1,276.5 and 2,312 yuan respectively, down 1.4%, 2% and 0.4% from Wednesday’s day session close.

Along with weakness in steel futures, the losses in iron ore contracts coincided with reports that Baosteel, China’s largest listed steel producer, believes Chinese iron ore demand has already hit its peak.

According to Reuters, the company said that as China adopts tougher environmental rules and stockpiles of steel scrap grow, output from electric-arc furnaces, or mini-mills that use only scrap as raw material, is expected to rise.

As such, it believes iron ore demand has already peaked and likely to stay flat.

While that may have contributed to some of the selling pressure earlier in the day, it did not flow through to sentiment in overnight trade with a small reversal in rebar futures helping to support the bulks.

Here’s the final scoreboard.

SHFE Rebar ¥4,147 , 0.10%
DCE Iron Ore ¥503.00 , 0.10%
DCE Coking Coal ¥1,277.00 , -0.70%
DCE Coke ¥2,328.00 , 0.28%

The modest price movements provide few clues as to what direction futures will travel on Friday.

Trade in all commodity contracts will resume at 11am AEST.

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