After logging back-to-back gains for the first time in a month on Monday, iron ore spot markets were hammered lower on Tuesday, giving back those gains and more during the session.
According to Metal Bulletin, the price for benchmark 62% fines slumped 2.6% to $61.01 a tonne, leaving it at the lowest level since June 27.
It has now lost 23.7% since August 21.
Lower grade ores were also in the wars with 58% fines tumbling 2.7% to $36.96 a tonne.
Bucking the trend, ore with 65% Fe content rose 0.1% to $86.50 a tonne, reflecting continued demand from steel mills for higher grade, more efficient ores ahead of looming steel production cuts that will begin in mid-November.
“The reduction in lower quality Induction Furnace (IF) capacity, rise in the coking coal, and strong demand has resulted in large blast furnaces increasing their consumption of higher grade 62-66% Fe at the expense of lower grade 56-60% Fe,” said analysts at Deutsche Bank.
Despite ongoing demand for higher grades fines and lump, Deutsche says the benchmark price could fall below $60 a tonne in the short-term as production cuts reduced demand for iron ore from Chinese mills.
“We think a demand ‘air pocket’ from Chinese steel production curbs over heating season from November 15 to March 15 could drive 62% Fe iron ore prices lower into the $50-60 a tonne range,” it says. “We now forecast $55 a tonne for [the December quarter] then a recovery to $70 a tonne by mid-2018.”
Providing an early indication that the slump in spot markets may not last, Chinese rebar and iron ore futures edged higher in overnight trade.
The January 2018 rebar contract in Shanghai finished at 3,578 yuan, up from the day session close of 3,553 yuan. Iron ore futures in Dalian also crawled off the mat, finishing at 441.5 yuan, up 1.5 yuan from the previous session close.
Coke and coking coal prices also pushed higher, hinting that pessimism towards the complex may be starting to ebb.
SHFE Rebar ¥3,578 , -0.64%
DCE Iron Ore ¥441.50 , 0.34%
DCE Coking Coal ¥1,095.50 , 1.25%
DCE Coke ¥1,819.00 , -1.30%
Trade in Chinese commodity futures will resume at midday AEDT.