Iron ore inches higher as Chinese inventories fall

Jie Zhao/Corbis via Getty ImagesIron ore in China.
  • Iron ore spot markets inched higher to start the week, adding to the gains seen on Friday.
  • Gains were helped by news that Chinese iron ore port inventories fell last week. However, steel stocks rose over the same period, keeping optimism under wraps.
  • Chinese rebar futures continued to slide in overnight trade. Iron ore futures were unchanged.

Iron ore spot markets inched higher to start the week, adding to the gains seen on Friday.

However, the movements were significantly less than those in Dalian iron ore futures, suggesting continued weakness in steel prices continues to weigh on sentiment.

According to Metal Bulletin, the price for benchmark 62% fines rose 0.2% to $65.49 a tonne, adding to Friday’s 0.7% increase.

Despite the modest lift in the benchmark, the movements in lower and higher grades were non-existent.

The price of 58% fines fell one solitary cent to $38.56 a tonne while 65% fines were unchanged at $89.60 a tonne.

The performance in spot markets was in stark contrast to the exuberance shown by iron ore futures traders on Friday evening.

After closing the prior session at 468 yuan, the September 2018 iron ore contract in Dalian held onto most of those gains on Monday, finishing trade at 464 yuan.

The buying surge followed news that Chinese iron ore port inventories fell by 2.35 million tonnes last week to 155.88 million tonnes, according to data from Mysteel consultancy.

However, while iron ore futures in Dalian climbed, rebar futures in Shanghai continued to fall with the October 2018 contract finishing Monday’s day session at 3,723 yuan, down from Friday’s night session close of 3,772 yuan.

The losses on Monday added the steep declines seen last week, seeing the October 2018 rebar contract shed the most since March.

Unlike the decline in iron ore port inventories, Chinese steel stocks rose last week.

They increased by 110,000 tonnes to 10.1 million tonnes, according to data from Mysteel consultancy, with rebar and hot-rolled coil product both rising over the week.

It was the first week in 15 that inventories failed to draw.

Separate data from Mysteel also revealed that utilisation rates at Chinese steel mills continued to rise last week, lifting 0.14 percentage points to 71.55% on the back of strong steel demand and healthy profit margins for many producers.

Hinting that the recent bounce in iron ore spot markets may reverse today, rebar futures continued to slide in overnight trade.

SHFE Rebar ¥3,699 , -1.12%
DCE Iron Ore ¥464.00 , -0.11%
DCE Coking Coal ¥1,183.00 , -1.50%
DCE Coke ¥2,040.00 , -3.18%

Trade in all Chinese commoodity futures will resume at 11am AEST.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.