- Iron ore spot markets weakened across the board on Wednesday.
- Further weakness in steel prices and underwhelming Chinese economic data largely explain the move.
- China’s Hebei province issued an orange smog alert late on Wednesday, automatically triggering steel mills located there to halve output levels.
- The Caixin-IHS Markit China manufacturing PMI for October will be released today.
Iron ore spot markets weakened across the board on Wednesday, undermined by further weakness in steel prices and underwhelming Chinese economic data.
According to Metal Bulletin, the price for benchmark 62% fines slumped 1.3% to $75.71 a tonne, snapping a winning streak that had extended for close to two weeks.
Smaller losses were also seen across higher and lower grades.
65% Brazilian fines dipped 0.5% to $98 a tonne while the price of 58% fines fell by a smaller 0.2% to $45.92 a tonne.
It was the first time declines were recorded across all three grades since October 19.
Despite Wednesday’s decline, 62%, 58% and 65% fines jumped by 9.3%, 13% and 1.7% respectively in October, leaving all three grades at or near multi-year highs.
The profit-taking in spot markets coincided with continued weakness in Chinese steel futures during the session.
Rebar futures in Shanghai finished trade at 4,127 yuan, down marginally from 4,130 yuan on Tuesday evening. It briefly hit 4,113 yuan during the session, the lowest level in a week.
Hot-rolled coil futures also weakened, ending the session at 3,802 yuan having fallen to the weakest level since early July in early trade.
The bulk of the move in steel markets occurred in overnight trade on Tuesday. However, official PMI data released by the Chinese government on Wednesday — revealing activity levels across China’s manufacturing sector improved at the slowest pace in over two years in October — did little to improve sentiment among market participants.
Despite the weakness in Chinese steel prices, bulk commodities went in the other direction, managing to eke out marginal gains.
Iron ore, coking coal and coke futures in Dalian finished at 533.5, 1,393 and 2,385.5 yuan respectively, up from 532, 1,384.5 and 2,382 yuan on Tuesday evening.
As seen in the scoreboard below, there was little movement on those levels during Wednesday’s night session.
SHFE Hot Rolled Coil ¥3,804 0.34%
SHFE Rebar ¥4,140 , 0.12%
DCE Iron Ore ¥533.50 , 0.09%
DCE Coking Coal ¥1,396.50 , 0.79%
DCE Coke ¥2,395.50 , 0.48%
There was little reaction to news that officials in China’s Hebei province, renowned for both its heavy industry and pollution, issued an “orange” pollution alert on Wednesday, automatically triggering steel mills to halve output levels.
This alert was also issued in Tangshan, China’s largest steel producing centre.
Trade in Chinese futures will resume at midday AEDT.
The latest Caixin-IHS Markit China manufacturing PMI survey for October will be released 45 minutes after trade resumes. Compared to the government’s PMI, this release tends to draw more of a reaction from financial markets.