Iron ore remains under pressure ahead of major economic data from China

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Iron ore sport markets fell for a third consecutive session on Wednesday.

According to Metal Bulletin, the price for benchmark 62% fines slid by 0.67% to $76.08 a tonne, extending its decline over the past seven sessions to 4.8%.

Higher grades also weakened with 65% Fe content losing 1.6% to $98.50 a tonne.

Lower grades bucked the trend with the price for 58% fines adding 0.9% to $49.41 a tonne.

Metal Bulletin said the losses in mid and higher grades followed weakness in Chinese steel markets — something that was prompted by wild swings in futures during the session.

“Rebar futures in particular fluctuated at prices below Tuesday’s settlement price of 3,900 yuan per tonne throughout the day on Wednesday,” said Metal Bulletin.

“The unstable paper market left participants uncertain about spot prices. Traders lowered their prices in an attempt to secure more sales, but only a few small transactions were concluded.”

Helen Lau, an analyst at Argonaut Securities in Hong Kong, said the fluctuations in futures may have been as a result of profit-taking.

“Prices have gone up quite a lot so sentiment is very fragile,” she told Reuters. “The sell-off may be due to short-term traders cashing in on recent market gain.”

From early June to early August, the most actively traded January 2018 rebar contract on the Shanghai Futures Exchange added close to 50%, helping to lift iron ore and coking coal markets as strong operating margins encouraged steel mills to lift output levels.

That in turn encouraged speculators to join in on the rally, leading to some wild price action in futures over the past month.

After climbing off the lows during Wednesday’s day session, Chinese futures weakened overnight, continuing the familiar pattern seen over much of this week — they tend to slide in overnight trade before recovering during the following day session.

Here’s how rebar, iron ore and coking coal contracts closed overnight.

SHFE Rebar ¥3,821 , -0.91%
DCE Iron Ore ¥550.00 , -0.27%
DCE Coking Coal ¥1,398.00 , 0.65%
DCE Coke ¥2,322.50 , -2.07%

During Wednesday’s day session, rebar and iron ore closed at 3,868 yuan and 556 yuan respectively.

Trade in Chinese commodity futures will resume at 11am AEST, coinciding with the release of Chinese manufacturing, non-manufacturing and steel industry purchasing managers indices (PMIs) for August.

All three reports carry the potential to generate significant movements in futures markets.

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