Iron ore is selling off again

Frederic J. Brown/AFP/Getty Images
  • Iron ore spot markets fell heavily on Friday, reversing gains of the prior two sessions.
  • The benchmark iron ore price has now lost 12% since March 1.
  • Chinese rebar and iron ore futures fell in late trade on Friday, pointing to the potential for further weakness ahead.

Iron ore sport markets went hard into reverse on Friday, giving back much of the gains achieved in the prior two sessions.

And with Chinese futures down heavily in overnight trade on Friday, it looks like spot markets may fall to fresh multi-month lows when trading re-opens, at least based on early indications.

According to Metal Bulletin, the price for benchmark 62% fines tumbled 3.1% to $69.84 a tonne, leaving sitting just above the recent low of $69.78 a tonne struck on Wednesday.

It has now lost 12% since the start of March.

Steep losses were also seen across lower and higher grades, albeit to a smaller degree.

58% fines slid 1.9%, settling at $40.41 a tonne. Higher grades fared a little better with ore with 65% Fe content sliding 1.6% to $86.80 a tonne.

The weakness in spot markets coincided with another reversal in Chinese rebar futures on Friday which finished lower after climbing in early trade.

The May 2018 contract in Shanghai slipped 0.5%, closing the session at 3,731 yuan a tonne.

That weighed on iron ore futures in Dalian which also gave up earlier gains, closing trade at 483.5 yuan a tonne.

As seen in the scoreboard below, both contracts continued to skid in overnight trade on Friday, especially iron ore which closed at the lowest level since mid-November.

SHFE Rebar ¥3,716 , -0.56%
DCE Iron Ore ¥472.50 , -2.48%
DCE Coking Coal ¥1,281.50 , -0.39%
DCE Coke ¥1,973.50 , -0.95

“Iron ore prices fell on physical demand concerns after Chinese policymakers told steel mills in the Wu’an area of the Hebei province to halt production until March 31,” said Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank, noting the announcement coincided with an increase in smog in the region.

Along with souring sentiment towards the outlook for iron ore demand, Dhar said renewed pessimism over steel demand also contributed to the weakness across the complex.

“Steel demand concerns, driven by the sharp rise in steel rebar stockpiles, also weighs on iron ore markets,” he said.

“Cold weather has stalled China’s construction season this year, but we think construction could fundamentally weaken in 2018 on the back of a weaker property sector.”

While futures have not been the best guide of late, the overnight weakness in rebar and iron ore contracts suggests spot markets may follow the same direction today.

Trade in Chinese futures will resume at midday AEDT.

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