It's starting to get nasty for iron ore markets

GABRIEL BOUYS / AFP / Getty Images
  • Iron ore prices remain under pressure.
  • The benchmark price has fallen 6.6% over the past four sessions, unwinding most of the gains achieved over the past two months.
  • Chinese iron ore and rebar futures were hammered on Tuesday, and failed to recover in overnight trade.

It’s starting to get nasty for iron ore markets.

Spot markets have now fallen for four consecutive days, largely reversing the gains achieved over the prior two months, and futures failed to bounce overnight, hinting that the selling pressure may persist today.

According to Metal Bulletin, the spot price for benchmark 62% fines skidded 1.4% to $64.41, extending its losses over the past four sessions to 6.6%.

It now sits at the lowest level since April 16.

The losses across lower grades were even more severe than the benchmark.

The price for 58% fines tumbled 2.4% to $37.87 a tonne, leaving it at the lowest level since April 17. It’s fallen 7% over the past six sessions.

Compared to low and mid grades, higher grades outperformed with 65% fines only falling 0.8% to $83.40 a tonne.

The across-the board weakness followed another burst of selling in Chinese rebar and iron ore futures on Tuesday.

Rebar futures in Shanghai finished at 3,573 yuan, down 1.13% from Monday’s day session close. They traded as low as 3,556 yuan.

Dalian iron ore futures were hammered even harder, finishing trade at 456 yuan, just off the lows of 453 yuan struck earlier in the session.

That was down 2.6% from Monday’s day session close, leaving it at a six-week low.

Analysts said ongoing weakness in steel prices is currently weighing on iron ore demand.

“Iron ore prices continued to track lower on weak demand as lower steel prices discouraged steel mills in China from procuring iron ore,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank.

“The fall in steel prices is linked to high steel inventories.

“Steel stockpiles though have tracked lower since they peaked in mid-March, indicating that steel markets have tightened since earlier this year.”

Hinting that iron ore spot markets may remain under the cosh today, Chinese futures failed to bounce in overnight trade.

As seen in the scoreboard below, rebar futures continued to slide while iron ore contracts were near unchanged.

SHFE Rebar ¥3,566 , -0.45%
DCE Iron Ore ¥457.00 , -0.54%

The price action suggests spot markets will remain pressured today, at least in early salvos.

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

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