Chinese iron ore futures go hard into reverse

Sandy Huffaker/Getty Images
  • Chinese iron ore futures fell sharply on Tuesday, completely reversing the gains achieved earlier in the week.
  • Iron ore spot market pricing was not available on Tuesday due to a public holiday in Singapore.
  • The weakness in futures continued in overnight trade as losses in steel contracts managed to offset the threat of supply disruptions in seaborne markets and news that iron ore shipments from Port Hedland fell by 8% in October, including a 12% drop to China.

Chinese iron ore futures fell sharply on Tuesday, completely reversing the gains achieved earlier in the week.

After finishing at 516 yuan on Monday evening, the January 2019 iron ore contract in Dalian closed Tuesday’s day session at 510 yuan, well off the high of 519 yuan seen earlier in the session.

The losses coincided with heavy losses in steel futures during the session.

Rebar and hot-rolled coil futures in Shanghai finished at 3,962 yuan and 3,719 yuan respectively, down sharply from Monday’s night session close of 4,060 yuan and 3,772 yuan.

Profit-taking was also evident in coking coal and coal contracts which fell to 1,370 yuan and 2,408.5 yuan respectively, down from 1,393 yuan and 2,429 yuan on Monday evening.

The trends seen during the day session extended into overnight trade on Tuesday.

Here’s the closing scoreboard.

SHFE Hot Rolled Coil ¥3,713 , -0.67%
SHFE Rebar ¥3,936 , -1.53%
DCE Iron Ore ¥508.00 , -1.17%
DCE Coking Coal ¥1,360.50 , -1.59%
DCE Coke ¥2,388.00 , -0.95%

The continued declines suggests spot markets may start off on a weaker footing on Wednesday.

Spot pricing from Metal Bulletin was not available for Tuesday due to a public holiday in Singapore.

On Monday, spot markets surged in response to news that BHP had suspended rail services within its iron ore decision in Western Australia due to a train derailment.

“We expect further weakness in exports from BHP during November given disruptions to the rail line caused by a runaway train incident,” said HSBC’s global mining and metals equities team in response to the news.

“All rail operations remain suspended pending the outcome of an investigation with the restart of these operations uncertain at present.”

Despite the threat posed to seaborne iron ore supply, along with data released by the Pilbara Ports Authority that revealed iron ore shipments fell by 8% last month, including a 12% drop in exports to China, that appears to have been more than offset by renewed weakness in steel markets.

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