- Iron ore prices fell hard on Tuesday on the back escalating trade tensions between China and the Unite States.
- Chinese rebar and iron ore inventories continued to fall last week.
- Chinese futures managed to crawl off earlier lows in overnight trade./strong>
Iron ore spot markets closed Monday’s session at the highest level in over a month. On Tuesday, it finished at two-week lows.
Like most other commodities, it was smoked on the back of renewed trade war fears, suffering one of the largest declines this year.
The spot price for benchmark 62% fines slumped 3% to $66.45 a tonne, according to Metal Bulletin, the largest fall since May 25.
Similar losses were seen in higher grades with 65% fines dipping 2.5% to $86.80 a tonne.
Lower grades fared a little better with 58% fines falling 1.5% to $66.45.
The steep losses mirrored similar moves in Chinese futures on Tuesday.
Rebar futures in Shanghai fell 2.9% to 3,769 yuan, pulling back from the near 10-month high struck on Friday.
Iron ore, coking coal and coke futures also went hard into reverse, slumping 4.6%, 4% and 4.1% respectively to 450.5, 1,199.5 and 2,086 yuan.
On Monday, US President Donald Trump directed officials to draw up a list of a further $US200 billion worth of Chinese imports that could be targeted with tariffs of 10%.
He threatened to extend that list by a further $US200 billion should China retaliate with additional tariffs on US imports of their own.
“If the United States loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures and retaliate forcefully,” China’s Ministry of Commerce warned in a statement.
The escalating trade tensions explains the large losses in spot and futures markets on Tuesday.
However, despite slumping on earlier in the session, Chinese futures managed to crawl higher in overnight trade.
Here’s the scoreboard.
SHFE Rebar ¥3,787 , -0.26%
DCE Iron Ore ¥451.50 , -0.77%
DCE Coking Coal ¥1,206.00 , -1.23%
DCE Coke ¥2,104.50 , -0.61%
Sentiment may have been supported by continued signs of strong steel demand in China.
According to Steelhome consultancy, rebar inventories held by traders fell by 273,200 tonnes to 4.7712 million tonnes last week. Iron ore port inventories also fell by 2.35 million tonnes to 158.68 million tonnes.
Both suggest that internal steel demand within China remains firm.
Trade in Chinese futures will resume at 11am AEST.