Iron ore tumbles into a bear market

Photo by China Photos/Getty Images
  • Iron ore spot markets fell across the board on Wednesday.
  • The benchmark price for 62% fines skidded 3.1%, extending its losses from March 1 to 20.5%, leaving it in a technical bear market.
  • Chinese steel and bulk commodity contracts finished mixed in overnight trade, providing few clues as to whether the weakness will continue into today’s trading session.

Iron ore has entered a bear market, falling heavily again on Wednesday.

According to Metal Bulletin, the spot price for benchmark 62% fines tumbled 3.1% to $63.12 a tonne, the lowest level since November 21.

The substantial decline, more than double the 1.3% gain seen a session earlier, saw the benchmark down 20.5% from March 1, leaving it in a technical bear market.

As opposed to the benchmark, the losses in lower and higher grades were far smaller for the session.

58% fines slipped 0.3% to $37.34 a tonne while ore with 65% Fe content fell by a larger 0.9% to $80.30 a tonne.

The across-the-board losses followed a wild session for Chinese steel and bulk commodity futures which tumbled on the open before recovering in the latter parts of trade.

Rebar futures in Shanghai clawed back to finish at 3,424 yuan, recovering after an earlier dip below the 3,400 yuan level.

“Steel prices have already fallen too much and the current cost doesn’t support prices to fall further,” Jin Tao, an analyst with Guotai Junan Futures in Shanghai, told Reuters. “Steel trading has picked up this week and some traders have cleared their stocks.”

Demand for steel product in China tends to improve in early Spring as construction activity ramps up as weather conditions improve.

Iron ore futures in Dalian put in a similar performance, closing the session at 438.5 yuan having earlier hit a low of 427.5 yuan, the lowest level since June 2017.

In contrast, coke futures were hammered, finishing the session nursing a loss of 4% at 1,776.5 yuan a tonne. It too fell to a multi-month low on Wednesday.

Coking coal futures fared a little better, finishing trade at 1,231.5 yuan a tonne, a loss of 1.7%.

As seen in the scoreboard below, while rebar futures inched higher in overnight trade, iron ore, coke and coking coal contracts all added to the losses seen during Wednesday’s day session.

SHFE Rebar ¥3,430 , -0.03%
DCE Iron Ore ¥434.00 , -0.57%
DCE Coking Coal ¥1,200.00 , -2.83%
DCE Coke ¥1,753.50 , -2.42%

The mixed performance across futures provides few clues as to whether the losses in iron ore spot markets will extend into Thursday.

Trade will resume in all commodity contracts at midday AEDT.

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