Iron ore prices fall again

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  • Iron ore prices fell again on Thursday, adding to the losses seen a session earlier.
  • It was the first time back-to-back declines were recorded across all major grades since mid-August.
  • The falls coincided with steep falls in Chinese steel futures during the session. They also occurred on the same day the Chinese yuan experienced a rare bout of buying.

Iron ore prices fell again on Thursday, adding to the losses seen a session earlier.

According to Metal Bulletin, the spot price for benchmark 62% fines slid 0.6% to $75.25 a tonne, extending its slide over the past two sessions to over 2%.

Lower and higher grades also fell on Thursday.

The price of 58% fines slipped 0.9% to $45.52 a tonne, outpaced by a 1.1% fall in the price of 65% fines which settled at $96.90 a tonne.

It was the first time since mid-August that back-to-back declines were recorded across the three major grades.

The weakness in iron ore spot markets may have been due to continued weakness in Chinese steel futures.

Rebar futures in Shanghai finished trade at 4,057 yuan, down from Wednesday’s night session close of 4,140 yuan. Hot-rolled coil futures fell even harder, tumbling from 3,804 yuan on Wednesday evening to close at 3,667 yuan.

The steep declines in steel prices put downward pressure on iron ore, coking coal and coke futures traded separately in Dalian.

The January 2019 contract finished trade at 519.5 yuan, well below the prior session close of 533.5 yuan.

While iron ore futures are, understandably, often influenced by movements in steel prices, the unusually large selloff coincided with a rare bout of strength in the Chinese yuan on Thursday.

Recently, iron ore futures have had a loose relationship with movements in the USD/CNY, often pushing higher as the yuan weakened against the greenback. Given iron ore is traded globally in US dollar terms, some have speculated in the past that futures have been used by investors in China as a way to hedge the risk of continued weakness in the yuan.

Like iron ore, coking coal and coke futures also fell on Thursday, closing at 1,385 and 2,343.5 yuan respectively, down from 1,396.5 and 2,395.5 on Wednesday evening.

As seen in the scoreboard below, futures finished mixed in overnight trade with steel and iron ore contracts edging higher while coking coal and coke fell further.

SHFE Hot Rolled Coil ¥3,677 , -1.68%
SHFE Rebar ¥4,064 , -0.85%
DCE Iron Ore ¥520.50 , -1.23%
DCE Coking Coal ¥1,382.50 , -0.97%
DCE Coke ¥2,347.00 , -1.18%

The mixed price performance provides few clues as to what direction spot markets will move today.

Chinese commodity futures will resume trade at midday AEDT.

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