Iron ore's losing streak continues

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  • Iron ore prices fell for a sixth consecutive session on Wednesday.
  • Chinese iron ore port inventories sit at the highest level since September last year. Rebar inventories have also hit the highest level since April last year.
  • Analysts suggest restrictions on sintering of iron ore fines in the Chinese city of Tangshan may be another factor behind recent price falls.

Iron ore prices continue to fall.

According to Metal Bulletin, the spot price for benchmark 62% fines fell by 0.3% to $83.54 a tonne on Wednesday, extending its losing streak into a sixth consecutive session.

It now sits at the lowest level since late January having shed 7.8% since February 11.

Losses were also seen across other major grades on Wednesday.

65% fines suffered the largest decline, sliding 1.7% to $94.90 a tonne, leaving it at the lowest level since January 29. Having fallen in each of the past five sessions, the price for 58% fines slipped another 0.4% to $67.88 a tonne.

Analysts put the continued falls down to tougher environmental restrictions on key steel-making centres within China, possibly explaining a recent lift in Chinese iron ore port inventories.

Some steel mills [are] being forced to adhere to stricter sintering curbs in Tangshan,” analysts at ANZ bank said.

Tangshan, located in China’s Hebei Province, accounts for around 11% of China’s steel production capacity.

Along with tougher environmental curbs in the city, restricting sintering of iron ore fines between 25 February to 3 March, Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank, said steel mills are “justifiably cautious of purchasing iron ore on the seaborne market given elevated iron ore port stockpiles and steel rebar inventories”.

“With iron ore demand subdued, we think the likelihood of a $US100 a tonne price spike is looking remote,” he said.

According to data from consultancy firm Steelhome, iron ore inventories at Chinese ports rose to 145 million tonnes last week, the highest level since September 21 last year.

Although iron ore inventory builds at this time of year aren’t unusual ahead of the key spring construction season, with rebar inventories held by traders sitting at the highest levels since April last year, it may be dissuading some mills from procuring raw materials.

The continued downdraft in iron ore spot markets was replicated in Chinese futures in Dalian which finished at 593 yuan, down from 599.5 yuan on Tuesday evening.

Coke futures also softened, falling to 2,122 yuan, below the prior night session close of 2,132.5 yuan. Coking coal futures manages to buck the trend, lifting from 1,290 to 1,295.5 yuan.

Limited movement was seen in Chinese steel futures in Shanghai.

The May 2019 rebar contract eased to 3,715 yuan, down from 3,728 yuan on Tuesday evening, while hot-rolled coil futures slipped three yuan to 3,734 yuan.

However, as seen in the closing scoreboard from Wednesday’s night session, steel futures rebounded in overnight trade.

SHFE Hot Rolled Coil ¥3,753 , 0.35%
SHFE Rebar ¥3,744 , 0.46%
DCE Iron Ore ¥600.00 , 0.42%
DCE Coking Coal ¥1,292.00 , -0.69%
DCE Coke ¥2,122.50 , -0.54%

The gain may explain the modest lift in iron ore futures during the session.

Trade in Chinese futures will resume at midday AEDT.

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