Iron ore prices barely budge despite more industrial curbs in China

Paula Bronstein/Getty Images
  • Iron ore spot markets recorded limited movement on Wednesday.
  • Tangshan, China’s largest steel production hub, announced an extension of industrial curbs on environmental grounds.
  • Despite that news, Chinese steel futures fell, weighing on higher grade iron spot prices and futures.

Little movement was seen across spot iron ore markets on Wednesday despite news that officials in Tangshan, China’s largest steel production hub, have extended industrial output curbs on environmental grounds.

Indeed, rather than supporting prices for more efficient, more environmentally friendly iron ore grades, the exact opposite reaction occurred.

According to Metal Bulletin, the price for benchmark 62% fines was near-static, settling at $87.05 a tonne, up two cents from Tuesday.

Elsewhere, 65% fines dipped 0.6% to $98.30 a tonne while 58% fines rose 0.4% to $68.53 a tonne.

The narrowing of the price spread came despite an extension of industrial curbs in northern China.

According to Reuters, officials in Tangshan, China’s largest steel production hub, decided to extend a level one smog alert amid unfavourable weather conditions.

“The level one alert, the highest in China’s four-tier pollution warning system, has been in place since March 1 and requires steel mills to curb output by 40-70%, or even stop production, depending on the scale of their emissions,” Reuters said.

In the past, such announcements lead to a spike in Chinese steel prices and strength in higher iron ore grades that are more efficient in terms of the steel they yield. Less efficient, lower iron ore grades, usually moved in the opposite direction over these periods.

But not Wednesday.

The unusual price movement in spot markets may reflect that instead of lifting on the news, Chinese steel futures went backwards during the session, perhaps explaining the lift in lower iron ore grades on profitability grounds.

Rebar and hot-rolled coil futures in Shanghai closed at 3,737 and 3,708 yuan respectively, down from 3,792 and 3,762 yuan on Tuesday evening.

Iron ore and coking coal futures in Dalian also fell, sliding to 610 and 1,266.5 yuan respectively, down from Tuesday’s night session close of 619 and 1,276 yuan.

Coke futures, in contrast to the broader theme across the steel and bulk commodity complex, were near-static, closing at 2,063.5 yuan.

In overnight trade on Wednesday, the losses during the day session were partially reversed.

SHFE Hot Rolled Coil ¥3,728 , -0.53%
SHFE Rebar ¥3,753 , -0.66%
DCE Iron Ore ¥613.00 , -0.97%
DCE Coking Coal ¥1,271.50 , -0.27%
DCE Coke ¥2,069.50 , -0.31%

The movements in futures provides few clues as to what direction physical markets will move on Thursday.

Trade will resume in Chinese commodity futures at midday AEDT.

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