Iron ore prices are under pressure

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  • Iron ore markets were choppy on Monday, largely reversing the moves seen on Friday.
  • Soft Chinese economic data, weakness in Chinese stocks and yuan, along with an increase in Chinese iron ore inventory levels last week, may have contributed to the deterioration in sentiment seen during the session.
  • Chinese commodity futures were largely unchanged in overnight trade, providing few clues as to whether the selling pressure will be sustained today.

Iron ore spot markets were mixed on Monday, largely reversing the moves seen a session earlier.

According to Metal Bulletin, the price for benchmark 62% fines fell 0.7% to $64.54 a tonne, giving back most of the 0.9% gain achieved on Friday.

Like the benchmark, higher grades also softened as the price for 65% fines dipped 0.1% to $91.60 a tonne.

After tumbling on Friday, sending its discount compared to 65% fines to the largest level on record, lower grades managed to buck the overall trend with 58% fines closing up 1.1% to $37.42 a tonne.

The weak performance from mid and higher grades followed a reversal in Chinese steel and bulk commodity futures on Monday.

Rebar futures in Shanghai finished at 3,751 yuan, down from Friday’s night session close of 3,794 yuan. It dipped to as low as 3,737 yuan at one point during the session.

The losses in rebar futures were mirrored by iron ore, coking coal and coke futures trade separately in Dalian.

Iron ore finished at 463 yuan, down from the prior sessions close of 468 yuan. It hit 459 yuan earlier in the day, having traded as high as 476 yuan on Friday.

Coking coal and coke futures were also under pressure, closing at 1,166.5 and 2,025.5 yuan respectively.

The reversal in both spot and futures markets followed another ugly selloff in Chinese stocks, especially among listed property developers which plunged by over 6%.

Real estate is a major source of demand for steel in China.

Data from the Chinese government and IHS Markit revealing new export orders placed with Chinese manufacturers fell in June may have also contributed to the selling pressure. The United States is scheduled to slap 25% tariffs on $34 billion worth of Chinese imports from Friday, perhaps contributing to the slowdown in demand last month.

Adding to headwinds for prices, Chinese rebar and iron ore inventories both increased last week, creating renewed concern about whether strong demand seen in Spring construction season will be maintained in the months ahead.

According to data from Steelhome consultancy, Chinese iron ore port inventories jumped by 1.7 million tonnes to 157.58 million tonne. Rebar inventories held by traders also increased by 291,000 tonnes to 4.72 million tonnes.

Providing few clues as to whether the selling pressure in spot markets will continue today, Chinese rebar and bulk commodity futures were largely unchanged in overnight trade.

SHFE Rebar ¥3,754 , -0.61%
DCE Iron Ore ¥464.50 , -0.11%
DCE Coking Coal ¥1,166.00 , -0.89%
DCE Coke ¥2,027.00 , -1.91%

Trade in Chinese commodity futures will resume at 11am, just before the resumption of trade in Chinese stocks and onshore traded yuan.

One suspects that the performance of these markets could prove influential on the movements in commodity futures today.

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