Iron ore tumbles below $100 as Chinese steel futures slide

Michael Hurcomb/Corbis via Getty Images
  • Iron ore prices fell heavily across the board on Monday, extending losses seen over the past week.
  • The benchmark price is now back below the $100 a tonne level for the first time since May 16.
  • Chinese steel futures fell heavily again on Monday. This was cited as one factor behind the weakness in both iron ore and coking coal prices.

Iron ore prices continued to tumble on Monday, adding to steep losses seen in recent days.

Weaker steel prices in China, eroding steel mill profit margins, was cited as one factor behind the sudden bout of weakness.

According to Metal Bulletin, the spot price for benchmark 62% fines slumped 2.4% to $99.12 a tonne, falling below the $100 a tonne level for the first time since May 16.

The benchmark has shed 8.7% from the multi-year peak of $108.62 a tonne stuck on Monday last week.

Steep falls were also seen across lower and higher grades on Monday.

58% fines slid 2.1% to $86.68 a tonne, extending its slide over the past four trading sessions to 4.2%. 65% fines fell by a larger 3.1% to $114.10 a tonne, leaving it down 7.5% over the past week.

Like physical markets, Dalian iron ore continued to unwind from the record high set a week earlier, ending Monday’s day session at 709 yuan. One week ago the September 2019 contracts rose to as high as 774.5 yuan.

The downdraft in spot and futures markets coincided with continued declines in Chinese steel futures to start the week.

Rebar and hot-rolled coil futures in Shanghai fell to 3,707 and 3,577 yuan respectively on Monday, down heavily from 3,754 and 3,644 yuan on Friday evening.

“Lower steel prices are discouraging steel mills in China from buying iron ore,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank.

“Steel margins are weakening, removing a key demand side support for iron ore prices.”

Helen Lau, Metals and Mining Analyst at Argonaut Securities in Hong Kong, told Reuters that steel prices were falling on weak demand, citing recent manufacturing PMI data from the Chinese government that showed new domestic and export orders both declined in May.

Separately, China’s official steel industry PMI also reported a sharp decline in new orders over the same period.

Mirroring the performance of iron ore futures, coking coal and coke contracts in Dalian also skidded lower, falling to 1,369 and 2,098.5 yuan respectively, below the 1,386.5 and 2,133 yuan level they finished on Friday evening.

There was little movement on those closing levels in overnight trade on Monday.

SHFE Hot Rolled Coil ¥3,574 , -1.19%
SHFE Rebar ¥3,707 , -0.72%
DCE Iron Ore ¥711.00 , -0.70%
DCE Coking Coal ¥1,372.50 , -0.33%
DCE Coke ¥2,101.50 , -0.64%

“While investors have been assuming the trade conflict would see Chinese authorities increase stimulus to support domestic demand … this is now being questioned as the mood deepens,” said analysts at ANZ Bank in relation to the recent pullback in iron ore prices.

Trade in Chinese commodity futures will resume at 11am AEST.

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