Iron ore prices slide again -- but there are signs the weakness may not last

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  • Iron ore spot markets fell heavily for a third consecutive session on Tuesday.
  • Analysts put the weakness down to soft steel demand in China, contributing to a lift in inventory levels.
  • Chinese rebar and iron ore futures rallied overnight, suggesting the weakness may not last.

Iron ore spot markets fell heavily for a third consecutive session on Tuesday, sliding to fresh one-month lows.

But with futures markets stabilising in recent trade, there are signs the selling pressure may not extend into a fourth straight session.

According to Metal Bulletin, the price for benchmark 62% fines slid 1.2% to $76.07 a tonne, leaving it at the lowest level since February 6.

It has now lost 4.2% since March 1.

Losses were also recorded across both lower and higher grades, albeit by a smaller margin.

58% fines lost 0.5%, settling at $43.06 a tonne. Ore with 65% Fe content fell by a smaller 0.4% to $92.30 a tonne.

Analysts put the continued slide down a strong lift in Chinese steel inventories, contributing to not only weakness in steel prices but also for raw materials such as iron ore and coking coal.

“The increase in steel stocks in the past two weeks was quite fast,” Cao Ying, analyst at SDIC Essence Futures, told Reuters.

Cao said that construction activity is only resuming gradually after the Lunar New Year holiday last month, contributing to the lift in inventories.

However, she says the weakness in steel prices is unlikely to last for long.

“We expect demand to recover from next week. In some cities, real estate is also booming and property inventory has come down,” she said, adding that further reductions in Chinese steel capacity this year should also help to support prices.

The May 2018 rebar contract in Shanghai closed Tuesday’s day session down 0.3% at 3,969 yuan a tonne, recovering after hitting a one-week low of 3,919 yuan a tonne earlier in the session.

That mirrored similar price action in iron ore futures in Dalian which also bounced off lows struck earlier in the session.

The May 2018 iron ore contract finished trade down 1.7% at 520.5 yuan a tonne, largely reversing an earlier decline to 516.5 yuan a tonne.

Continuing the theme seen in the latter parts of Tuesday’s day session, futures continued to recover in overnight trade.

Here’s the final scoreboard.

SHFE Rebar ¥3,980 , 0.66%
DCE Iron Ore ¥524.50 , 0.87%
DCE Coking Coal ¥1,379.50 , 0.00%
DCE Coke ¥2,194.00 , 0.46%

The strength in both rebar and iron ore futures provides an early indication that spot markets may follow suit today.

Trade in Chinese commodity futures will resume at midday AEDT.

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