Iron ore is still getting pulverised

(Photo by Richard Heathcote/Getty Images)

Iron ore spot markets fell for a third consecutive session on Friday, coinciding with yet another sharp slide in Chinese futures.

According to Metal Bulletin, the price for benchmark 62% fines fell 2.3% to $60.08 a tonne, leaving it a fresh two-week low.

It lost 3.8% for the week, extending its decline from August 21 to 25%.

Both higher and lower grades also fell during the session.

Ore with 65% Fe content slid 2.1% to $80.80 a tonne while the price for 58% fines fell by a smaller 1.7%, setting at $35.21 a tonne.

Despite the relative outperformance on Friday, the price for 58% fines now sits at the lowest level since January 2016.

“More cities, including Tangshan, have been ordered to deepen production cuts during the winter season,” Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen, told Reuters.

“Low-grade iron ore prices have almost touched the bottom, but we don’t see any support for prices in the near term due to falling operational rates at mills.”

Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, agrees with Zhao’s assessment, noting that if there is to be any demand from Chinese mills in the near-term, it’s likely to be for more efficient, higher grade ores.

“The winter cuts to China’s steel production have also increased the preference for higher grade ores,” he says. “China’s focus on environmental protection though means some of the switch to higher grade ores is permanent.”

China’s government has introduced steel production cuts over winter months in an attempt to help improve air quality in northern provinces. The cuts have increased concern over the outlook for iron ore demand.

Mirroring the performance in spot markets, Chinese iron ore and rebar futures also tumbled, adding to the losses seen earlier in the week.

The January 2018 iron ore contract in Dalian slumped 5.6% to 428 yuan. It now sits close to the lowest level seen in four months.

Rebar futures in Shanghai also slumped, falling 2.4% to 3,577 yuan.

Providing few clues as to what direction spot markets will move on Monday, futures bounced modestly on Friday evening.

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

SHFE Rebar ¥3,600 , -0.53%
DCE Iron Ore ¥429.50 , -2.28%
DCE Coking Coal ¥1,113.00 , 0.95%
DCE Coke ¥1,746.00 , 0.69%

Both iron ore and rebar rose slightly from Friday’s day session close, although the moves are not significant enough to suggest a meaningful turnaround is on the cards.

Much will be determined by today’s day session that will begin at midday AEDT.

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