Iron ore goes into reverse

Daniel Berehulak / Getty Images
  • Iron ore spot markets softened on Tuesday, continuing the choppy price action seen in recent months.
  • Chinese steel and iron ore futures fell in overnight trade, pointing to the likelihood of early weakness in spot markets.
  • The Australian government sees iron ore prices averaging $US55 a tonne in the upcoming financial year, unchanged from the view offered in 2017/18.

Iron ore spot markets softened on Tuesday, continuing the choppy price action seen in recent months.

According to Metal Bulletin, the price for benchmark 62% fines slipped 0.7% to $66.80 a tonne, pulling back from a two-week high struck on Monday.

Both lower and higher grades also weakened during the session.

58% fines dipped less than 0.1%, settling at $39.54 a tonne. 65% fines posted a similar decline, sliding just over 0.1% to $85.20 a tonne.

The modest declines coincided with weakness in Chinese steel futures on Tuesday.

Rebar futures in Shanghai finished Tuesday’s day session at 3,637 yuan, down marginally from Monday’s night session close of 3,651 yuan.

Despite the weakness in steel prices, iron ore futures in Dalian went the other direction, finishing trade at 476 yuan a tonne, up from 472 yuan on Monday evening.

Analysts put the divergence down to speculation that strengthening Chinese steel production will lead to higher demand for raw materials.

“Supported by China’s steel demand recovery, China’s steel plants increased their production to meet demand,” brokerage Argonaut said in a note seen by Reuters.

“Rising steel output points to a positive demand outlook for iron ore and other raw materials against a backdrop of declining steel inventory.”

While that may have driven the price divergence on Tuesday, that theme did not continue in overnight trade.

As seen in the scoreboard below, both rebar and iron ore futures fell.

SHFE Rebar ¥3,600 , -1.40%
DCE Iron Ore ¥469.50 , -0.74%

The weakness in futures suggests spot markets may follow suit on Wednesday, at least in early trade.

Chinese commodity futures will reopen at 11am AEST.

NOW READ: Here are the Australian government’s new commodity price forecasts

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