The iron ore rally is taking a breather as China seeks to boost domestic supply

  • Iron ore prices dipped marginally on Thursday.
  • Chinese new bank lending fell short of expectations in April. The Chinese government also announced it is looking at ways to boost domestic iron ore supply. China is the world’s largest importer of iron ore.
  • US tariffs on Chinese imports look set to increase on Friday. China has promised to retaliate.

Iron ore prices eased lower on Thursday, adding to modest losses seen a session earlier.

According to Metal Bulletin, the spot price for benchmark 62 per cent fines dipped 0.2% to $95.38 a tonne. 58% fines also fell 0.2% to $83 a tonne while 65% fines were flat at $109.80 a tonne.

Lower and higher grades rose to multi-year highs earlier in the week, surging on the back of renewed concerns over supply disruptions in Brazil.

On Thursday, China’s National Development and Reform Commission (NDRC) said it was investigating ways to boost the development of domestic iron ore miners and increase ore supply in the country, according to Reuters.

The NDRC also announced that it will support Chinese steel mills to set a “more reasonable” pricing mechanism on imported iron ore.

Perhaps contributing to the small declines in spot markets, Chinese new bank lending fell short of expectations in April, increasing by 1.02 billion yuan, below the 1.69 billion yuan level of March and forecasts for a smaller decline to 1.2 billion yuan.

Growth in broader total social finance also undershot expectations, lifting by 1.36 billion yuan. That was less than half the 2.86 billion yuan level of a month earlier and forecasts for an increase of 1.7 billion yuan.

The modest losses in physical iron ore markets came despite small gains in Chinese iron ore and steel futures on Thursday.

The September 2019 iron ore contract in Dalian finished trade at 644.5 yuan, up marginally from 637 yuan on Wednesday evening. Rebar futures in Shanghai also edged higher, lifting to 3,737 yuan. Hot-rolled coil futures were near-flat at 3,669 yuan.

Those moves were replicated in coking coal and coke futures which finished trade at 1,357 and 2,156 yuan respectively, around the same levels they closed on Wednesday night.

Small moves were also seen in overnight trade on Thursday, albeit five contracts edged lower.

SHFE Hot Rolled Coil ¥3,664 , 0.03%
SHFE Rebar ¥3,724 , -0.05%
DCE Iron Ore ¥639.50 , -0.16%
DCE Coking Coal ¥1,353.00 , -0.55%
DCE Coke ¥2,147.50 , -0.21%

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

The US intends to increase tariffs on $US200 billion worth of Chinese imports from 10% to 25% on Friday, setting a deadline that will lapse early afternoon on Australia’s east coast.

China has promised to retaliate to any US move.

Trade talks between the two nations are currently underway in Washington, DC.

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