Iron ore prices are choppy

Michael Urban/AFP/Getty Images
  • Iron ore prices finished mixed on Thursday. Mid and higher grades rose while lower grades went backwards.
  • The rally in prices has stalled in recent days. Analysts said Chinese steel mills are reluctant to buy ore at current levels.
  • Chinese steel and iron ore futures edged lower in overnight trade on Thursday.

Iron ore spot markets remain choppy after surging earlier in the week.

According to Metal Bulletin, the price for benchmark 62% fines rose 1.3% to $88.32 a tonne, snapping a two-day losing streak in the process.

The price for 65% fines also rose, settling at $99.90 a tonne, up 0.4% from Wednesday.

After outperforming the movements in mid and higher grades over the past couple of months, prices for lower grade ore went backwards on Thursday.

58% fines slid 0.6% to $69.83 a tonne, recording its first back-to-back decline since early January.

Analysts and industry experts said the sudden pause in price gains reflects a reluctance from Chinese steel mills to procure ore at current levels.

“Mills have been reluctant to buy seaborne iron ore given that Vale have not officially cancelled or amended long term iron ore supply contracts with them,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank.

“Steel mills are also looking to draw down on their iron ore inventories and then port stocks, before looking to the seaborne market.”

Similar views were also expressed by Chinese steel producers.

“It’s hard for us to accept such high iron ore prices as the priority of steel mills at this moment is to reduce costs, rather than ramping up output,” a manager at a steel firm in Hebei told Reuters.

“Most of steel mills in China are still on the Lunar New Year holiday break and will not start to replenish their stocks until next week.”

The mixed performance in spot markets followed a late recovery in Dalian iron ore futures on Thursday.

The May 2019 contract finished at 628.5 yuan, up from 619.50 yuan on Wednesday evening. Rebar and hot-rolled coil futures traded separately in Shanghai also recovered from early losses, ending the session at 3,684 and 3,606 yuan respectively, up slightly from Wednesday’s night session close.

However, all three contracts lost ground in overnight trade on Thursday.

SHFE Hot Rolled Coil ¥3,567 , -0.89%
SHFE Rebar ¥3,635 , -1.49%
DCE Iron Ore ¥622.00 , 0.08%
DCE Coking Coal ¥1,276.00 , 0.04%
DCE Coke ¥2,066.00 , -0.43%

The modest weakness points to the likelihood of a sluggish start in physical markets on Friday.

Trade in Chinese commodity futures will resume at midday AEDT, the same time the Chinese government will release CPI and PPI data for January.

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