Iron ore prices rebound following a string of heavy losses

Victor Fraile/Getty Images
  • Iron ore prices rebounded on Tuesday, snapping the longest losing streak seen in months.
  • Chinese steel futures reversed early losses to close higher, likely helping to support sentiment.
  • The Caixin-IHS Markit China Services PMI for May will be released on Wednesday.

Iron ore markets rebounded on Tuesday, helped by strength in Chinese steel futures.

According to Metal Bulletin, the spot price for benchmark 62% fines rose 1.3% to $100.38 a tonne, finding support after falling 8.7% in the previous five sessions.

While only three days, the increase snapped the longest losing streak since mid-May. As seen in the chart below, there haven’t been many price falls recently.

Gaines were also recorded across lower and higher grades on Tuesday.

58% fines jumped 2% to $88.42 a tonne while 65% fines rose by a smaller 1.1% to $115.40 a tonne.

With lower grades outperforming during the session, the discount for 58% fines compared to the benchmark price narrowed to the lowest level since February 2016.

The strength in physical markets was replicated in Dalian iron ore futures.

The September 2019 contracts rose to 720.5 yuan having fallen to 707 yuan earlier in the session. It closed at 711 yuan on Monday evening. The contract hit a record high of 774.5 yuan on Monday last week.

Contributing to the reversal of recent price declines, Chinese steel futures traded in Shanghai also bounced on Tuesday.

Rebar and hot-rolled coil contracts for delivery in October this year rose lifted to 3,745 and 3,609 yuan respectively, up from Monday’s night session close of 3,707 and 3,574 yuan.

Steel prices are often influential movements in iron ore markets given the implications for both profitability and output levels at steel producers.

Like iron ore, Dalian coking coal and coke futures also bounced, rising to 1,380.5 and 2,127 yuan respectively.

The early gains were partially unwound in overnight trade on Tuesday, providing few clues as to whether the rebound in steel and bulk commodity markets will extend into Wednesday’s trading session.

SHFE Hot Rolled Coil ¥3,607 , 0.56%
SHFE Rebar ¥3,744 , 0.62%
DCE Iron Ore ¥717.00 , 0.21%
DCE Coking Coal ¥1,379.00 , 0.29%
DCE Coke ¥2,109.50 , -0.09%

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

At 11.45am AEST, the Caixin-IHS China Services PMI for May will be released, providing a snapshot on the performance from China’s non-manufacturing sectors, including construction.

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