Iron ore goes hard into reverse

  • Iron ore spot and futures markets fell heavily on Tuesday, completely reversing all of Monday’s gains.
  • Weakness in Chinese steel markets likely contributed to the reversal.
  • Futures markets were largely unchanged in overnight trade, providing few clues as to what direction spot markets may travel today.

Iron ore spot markets went hard into reverse on Tuesday, mirroring the price action seen in Chinese futures earlier in the session.

According to Metal Bulletin, the price for benchmark 62% fines slid 3.1% to $63.76 a tonne, more than unwinding the 1.2% gain achieved on Monday.

It now sits just above the multi-month low of $63.12 struck on March 28.

Like the benchmark, losses were also seen across lower and higher grades, albeit by a smaller margin.

58% fines lost 1% to settle at $37.59 a tonne. Ore with 65% Fe content fared a little worse, sliding 1.9% to close at $81.50 a tonne.

The losses followed a reversal in Chinese steel and iron ore futures on Tuesday.

Having closed Monday’s night session at 3,652 yuan, the May 2018 rebar future in Shanghai weakened throughout Tuesday’s day session, eventually finishing trade at 3,599 yuan.

That led to weakness in iron ore, coking coal and coke futures traded separately in Dalian which finished at 441 yuan, 1,286.5 yuan and 1,872.5 yuan a tonne respectively, all below Monday’s night session close.

“China’s President Xi Jinping urged local governments to speed up efforts to reduce debt, which is raising concerns amongst investors that investment in the industrial and manufacturing sectors will weaken,” said analysts at ANZ Bank. “This saw steel futures prices fall, dragging steel-making raw material prices with them.”

However, while that may explain the weakness on Tuesday, as seen in the scoreboard below, there was very little movement on those levels in overnight trade.

SHFE Rebar ¥3,601 , -0.72%
DCE Iron Ore ¥439.00 , -1.79%
DCE Coking Coal ¥1,283.00 , -0.35%
DCE Coke ¥1,873.00 , 0.16%

Chinese commodity futures will resume trade at 11am AEST.

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