Chinese steel and iron ore futures are getting hammered

  • Iron ore spot and futures markets softened on Thursday, mirroring weakness in Chinese steel prices.
  • Steel and bulk commodity futures in China were hammered in overnight trade on Thursday, pointing to the likelihood of weakness in spot markets on Friday.
  • The Caixin-IHS Markit China manufacturing PMI for September will be released today. Compared to the official PMI released by the government, financial markets tend to react to this survey.

Iron ore spot markets weakened on Thursday, coinciding with continued softness in Chinese steel prices.

And with Chinese steel and bulk commodity futures hammered in overnight trade, it looks like there may be more weakness to come on Friday.

According to Metal Bulletin, the spot price for benchmark 62% fines dipped 0.4% to $68.67 a tonne, adding to a similarly-sized fall on Wednesday.

After hitting a six-month high earlier in the week, the price for 58% fines tumbled, losing 2% to settle at $40.13 a tonne.

The price for 65% Brazilian fines managed to buck the broader trend, adding 0.2% to $96.40 a tonne.

The weakness in spot markets was mirrored in Chinese futures which continued to slide.

Rebar futures in Shanghai finished trade at 4,008 yuan, recovering after hitting a two-week low of 3,998 yuan earlier in the day. However, that was still well below the 4,073 yuan level it closed Wednesday’s night session.

Iron ore futures in Dalian took a slightly different tangent, initially spiking to as high as 506 yuan before reversing hard in latter trade to close at 497.5 yuan. That too was well below the 503 yuan level it finished in overnight trade on Wednesday.

Coking coal and coke contracts also came under pressure, slumping to 1,268.5 and 2,253.5 yuan respectively, down from the prior close of 1,274.5 and 2,289.5 yuan.

And those earlier declines got significantly larger in overnight trade on Thursday.

As seen in the scoreboard below, they were thumped across the board.

SHFE Rebar ¥3,910 , -3.55%
DCE Iron Ore ¥489.00 , -2.30%
DCE Coking Coal ¥1,249.00 , -1.81%
DCE Coke ¥2,206.00 , -3.08%

The scale of the losses could be explained by position squaring ahead of a week-long holiday in China starting On October 1. However, the scale of the losses still points to the likelihood of weakness in spot markets today, at least in initial trade.

In what could either add to reverse the overnight moves, the Caixin-IHS Markit China manufacturing PMI for September will be released at 11.45am AEST. Compared to the official PMI report released by the Chinese government, this survey tends to be of more influence over financial markets.

Chinese futures will resume trade at 11am AEST.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.