- Iron ore prices fell heavily for a second consecutive session on Monday.
- Chinese iron ore futures, along with bulk commodity contracts, were also under pressure. Some put the weakness down to concern about the outlook for Chinese steel mill demand.
- Chinese steel and bulk commodity futures pushed higher in overnight trade on Monday, pointing to a firmer start for physical markets on Tuesday.
Iron ore prices fell heavily for a second consecutive session on Monday, led by higher grades.
According to Metal Bulletin, the spot price for benchmark 62% fines tumbled 2.3% to $83.79 a tonne, adding to the 2.1% decline seen on Friday.
The benchmark has now fallen 7.5% since hitting a multi-year high of $90.58 a tonne in early February.
Large declines were also seen across the major grades on Monday.
65% fines slumped 3.2% to $95.40 a tonne, logging its largest percentage decline since late November last year.
58% fines was the relative over-achiever, only slipping 0.8% to settle at $68.36 a tonne.
Some put the weakness down to concerns over the outlook for demand in China, the world’s largest iron ore consumer.
“The air pollution situation in many areas in China is not that good. I believe there will be another round of restrictions on production for the steel industry,” a Shanghai-based trader told Reuters.
Along with the threat of more or tougher output restrictions on environmental grounds, the trader said a lot of construction projects in China’s largest cities had been temporarily paused during China’s National People’s Congress.
“This could have some impact on the demand,” they said.
According to consultancy firm Steelhome, Chinese iron ore port inventories rose to 147.65 million tonnes last week, the highest level since September 2018. Inventory builds before the key spring construction season in China are not unusual at this time of year.
However, the recent increase has come despite Chinese iron ore imports falling to 174.4 million tonnes in the first two months of the year, down 5.5% on the same period in 2018.
The broad-based falls across spot markets were mirrored in Dalian iron ore futures with the May 2019 contract ending Monday’s day session at 598 yuan, down from 604.5 yuan on Friday evening.
“Bulk commodity markets remain under pressure as investors continue to fret about Chinese demand,” said analysts at ANZ Bank.
“[Iron ore] inventories at ports have risen for the past five weeks, going against expectations of a fall following supply disruptions in Brazil. However, it’s been debates about the prospects of Chinese steel demand that have kept investors cautious.”
Coke futures were also under pressure on Monday, sliding from 1989.5 yuan to close at 1966.5 yuan. Coking coal futures finished at 1,226 yuan, unchanged from Friday’s night session close.
The weakness in bulk commodities was not replicated in Chinese steel futures with the most actively traded rebar and hot-rolled coil contracts in Shanghai finishing trade at 3,723 and 3,692 yuan respectively. The former was unchanged from the prior night session close, while the latter climbed from 3,676 on Friday evening.
However, while all five contracts went in separate directions during the day session, they all gained ground in overnight trade on Monday.
SHFE Hot Rolled Coil ¥3,745 , 1.60%
SHFE Rebar ¥3,765 , 1.02%
DCE Iron Ore ¥603.50 , 0.42%
DCE Coking Coal ¥1,230.00 , -0.12%
DCE Coke ¥1,984.00 , -0.40%
The modest rebound in both steel and bulk commodity contracts points to a firmer start for physical markets on Tuesday.
Trade in Chinese commodity futures will resume at midday AEDT.
Looking ahead, China will release industrial output and urban fixed asset investment figures for February on Thursday. The details will likely go someway to answering whether current concerns over Chinese iron ore demand are warranted.
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