Iron ore's latest bounce didn't last long

FRANCK FIFE / AFP / Getty Images

After a solid bounce on Tuesday, normal operations resumed across iron ore spot markets on Wednesday.

Prices fell again, lead by mid-and-higher grades.

According to Metal Bulletin, benchmark 62% fines fell 1.2% to $64.15 a tonne, the fourth loss recorded in the past five sessions.

Higher grades also came under renewed pressure with ore with 65% Fe content sliding 0.8% to $88.80 a tonne.

Lower grades bucked the trend with 58% fines holding steady at $39.30 a tonne.

Trade was thin as market participants wound back procurement before a week-long holiday in China beginning on October 1.

With market activity slowing to a crawl, many are now pondering where prices will head next as we approach the final throngs of 2017.

To Westpac’s strategy team, the risks appear to be slanted to the downside.
“We have been arguing that markets were too downbeat on iron ore for some time and that a rise to the late $70s or even early $80s was likely. Thus the recent high at $80 was fully justified in our view,” says Westpac.

“However, our concern now is that iron ore markets are more likely to soften as the National People’s Conference and seasonal plant closures came into view.

“Another factor adding to this view has been that rebar inventory levels have started to rise as they did last year. This was arguably one factor that weighed on iron ore and steel prices in Q3 last year and may again do so this year.”

While it sees further downside risks, it thinks that any further losses are likely to be modest in nature.

“A key point to keep in mind is that the pace of increase of seaborne iron ore exports remains muted at best,” it says.

“Indeed on the basis of shipping data for the month of September so far, combined exports from Australia and Brazil are running at -0.1% in Q3 from the same period a year earlier.

“The lack of supply pressure should limit near term downside risks.”

Providing no clear indication as to what direction iron ore spot markets will move today, Chinese iron ore and rebar futures did very little in overnight trade.

Here’s the final scoreboard for Wednesday’s night session.

SHFE Rebar ¥3,661 , 0.47%
DCE Iron Ore ¥465.50 , -0.43%
DCE Coking Coal ¥1,145.00 , -1.97%
DCE Coke ¥1,922.00 , -3.73%

Both iron ore and rebar futures softened from Wednesday’s day session close of 473 yuan and 3,679 yuan respectively.

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

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