Iron ore futures are getting smoked

JUSTIN TALLIS / AFP / Getty Images

Iron ore spot markets popped higher on Tuesday, benefiting from strength in Chinese steel prices.

According to Metal Bulletin, the price for benchmark 62% fines jumped 1.6% to $63.17 a tonne, leaving it at the highest level since November 6.

Higher and lower grade ores also rallied, albeit by a smaller degree.

58% fines rose 1% to $36.43 a tonne while ore with 65% Fe content added 0.2% to $81.40 a tonne.

The gains were supported by a rally in rebar futures in Shanghai which jumped 2.23% to 3,946 yuan, the highest level since September 13. That acted to support iron ore futures in Dalian which added 0.87% to 464.5 yuan.

The ongoing rally followed the release of Chinese industrial output and fixed asset investment figures for October, including steel production and property investment.

Crude steel output rose to 72.36 million tonnes, up marginally on 71.827 million tonnes produced in September. Total output rose by 6.1% between January to October compared to same period a year earlier.

Real estate investment grew by 7.8% between January to October compared to the same period a year earlier, below the 8.1% pace in the first nine months of the year.

New construction starts and property sales by floor space both decelerated, rising by 5.6% and 8.2% respectively, down from 6.8% and 10.3% between January to September.

Helping to offset the regulator-enforced slowdown in the property market, infrastructure investment continued to hum along nicely, growing by 19.6% compared to the same period in 2016.

However, despite having no impact during Tuesday’s day session, Chinese futures went hard into reverse in overnight trade.

Here’s the closing scoreboard from Tuesday’s night session.

SHFE Rebar ¥3,862 , -1.25%
DCE Iron Ore ¥444.00 , -4.62%
DCE Coking Coal ¥1,184.00 , -2.15%
DCE Coke ¥1,775.00 , -2.53%

Ugly, particularly for Dalian iron ore which was hosed by over 4%. Rebar, coke and coking coal contracts also reversed, mirroring a broader move across base metals such as zinc and copper.

Unless the losses in futures are whittled away today, it suggests spot markets will also come under pressure.

Trade in Chinese commodity futures will resume at midday AEDT.

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