The iron ore price rally stalls

Paul Gilham/Getty Images
  • The spread between low and high-grade iron ore prices narrowed on Monday.
  • Chinese steel and iron ore futures staged a large reversal during the session, closing sharply lower. That move continued in overnight trade.
  • China’s National People’s Congress (NPC) will begin today.

Iron ore spot price converged on Monday, largely reversing the trends seen late last week.

According to Metal Bulletin, the price for benchmark 62% fines slipped 0.3% to $87.69 a tonne, pulling back having surged over 5% in the prior two sessions.

In contrast to the benchmark price, lower and higher grades rose.

After falling modestly on Friday following news of further industrial production curbs in northern China on environmental grounds, the price for 58% fines reversed those gains and more on Monday, lifting 1.1% to $68.61 a tonne.

As it has done in the prior two sessions, the price for 65% Brazilian fines continued to grind higher, settling at $98.20 a tonne, up 0.1% from Friday.

The mixed performance across spot markets followed a Topsy Turvy session for Dalian iron ore futures on Monday.

After soaring to 646.5 yuan in early trade, the most actively traded May 2019 contract reversed hard into the close, eventually finishing at 620.5 yuan. It previously closed at 643.5 yuan on Friday evening.

The reversal in iron ore futures was mirrored by steel contracts traded in Shanghai.

The May 2019 rebar and hot-rolled coil contracts on the Shanghai Futures Exchange finished at 3,811 yuan and 3791 yuan respectively, down from 3,847 yuan and 3,817 yuan from Friday’s night session close.

As seen in the scoreboard below, those moves, including coke and coking coal contracts, continued in overnight trade on Monday.

SHFE Hot Rolled Coil ¥3,769 , -1.00%
SHFE Rebar ¥3,776 , -1.18%
DCE Iron Ore ¥615.50 , -2.46%
DCE Coking Coal ¥1,279.00 , -1.31%
DCE Coke ¥2,091.00 , -2.31%

The solid falls point to early weakness in physical markets on Tuesday. Trade in Chinese commodity futures will resume at midday AEDT.

China’s National People’s Congress (NPC) will begin today, and is scheduled to run through until mid-March.

“Chinese Premier Li Keqiang is expected to announce 2019 targets for GDP growth, inflation, the budget deficit and the local government bond quota,” says Joseph Capurso, Senior Strategist at the Commonwealth Bank.

“We expect the GDP growth target for 2019 will be lowered to a range of 6.0 6.5%. The inflation target should remain at 3%. We will also learn more about China’s budget stimulus plan, including tax cuts, infrastructure spending and local government bond issuance.”

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