Iron ore prices are in free fall, suffering the largest one-day percentage decline in over a year on Wednesday.

According to Metal Bulletin, the spot price for benchmark 62% fines plummeted 8.5% to $68.04 a tonne, leaving it at the lowest level since November 7 last year.

It was the largest percentage decline since March 9, 2016.

Underlining just how severe the sell-off has been in recent days, the benchmark price has now fallen 16.6% in just five sessions, extending the decline from the multi-year high of $94.86 a tonne on February 21 to 28.3%.

The daily chart below looks just plain ugly.


Both higher and lower grade ores came under significant pressure, albeit not to the same degree as the benchmark price.

“Recent precipitous declines appear to provide an insight into the current extent of the unbalanced fundamentals associated with the iron ore market,” said Metal Bulletin following the release of its daily Iron Ore Index.

In dollar terms, the $6.34 drop in the benchmark price was the largest movement since March 2014, it said.

It appears that a combination of high steel prices, strong Chinese steel production and near record-high iron ore port inventories has finally taken its toll on demand for both steel and its raw ingredients, seeing buyers retreat to the sidelines.

“China’s spot rebar prices moved sharply lower again on Wednesday amid weak demand,” the group said, noting that weakness in billet and rebar futures added to bearish sentiment in spot markets.

“Buyers continued to avoid procurement today on expectations of further price cuts in the near term.”

Until prices drop to levels that will entice buyers back to the market, both steel and iron ore look set to remain under significant pressure.

That was reflected in movements in Chinese commodity futures overnight with rebar, iron ore, coking coal and coke futures all finishing in the red.

SHFE Rebar ¥2,957 , -1.24%
DCE Iron Ore ¥503.50 , -1.37%
DCE Coking Coal ¥1,154.50 , -3.31%
DCE Coke ¥1,629.50 , -3.24%

The September 2017 iron ore contract finished trade down 1.37% at 503.5 yuan, having fallen to as low as 495.5 yuan earlier in the session.

Trade in Chinese commodity futures will resume at 11am AEST.