- Iron ore spot markets rose for a second consecutive session on Wednesday. Prices were hammered on Monday.
- A rebound in Chinese steel futures likely helped to fuel buying in bulk commodity contracts.
- Goldman Sachs see the benchmark iron ore spot price recovering to $70 a tonne in the March quarter of next year.
Iron ore spot markets rose again on Wednesday, continuing to recover from a mammoth fall to start the week.
According to Metal Bulletin, the price for benchmark 62% fines rose 1.8% to $66.35 a tonne, adding to the 1.5% gain seen on Tuesday.
The benchmark fell by 8.4% on Monday — the steepest drop since early 2017 — as Chinese steel prices tumbled, eroding profitability at Chinese steel producers.
Higher grade ore was also in demand with the price for 65% Brazilian fines adding 1.3% to $82.90 a tonne. 58% fines was the relative laggard for the session, lifting by a smaller 0.6% to $40.31 a tonne.
“Most of the price correction should be behind us,” said analysts at Goldman Sachs in relation to the recent slide in prices.
“We think the broad-based sell-off in steelmaking raw materials is mainly driven by weakening steel margins, which in turn is due to looser-than-expected winter steel production curtailment and higher-than-expected steel supply in a macro environment with elevated uncertainties and weak sentiment.”
However, Goldman doesn’t expect those dynamics to remain in place for long, forecasting the benchmark iron ore price will lift to $70 a tonne in the first quarter of next year on reduced supply and restocking demand from Chinese mills.
Nearer-term, a rebound in Chinese steel prices, as was the case on Tuesday, was the catalyst behind the broad-based strength seen across spot iron ore markets on Wednesday.
Rebar futures in Shanghai climbed to 3,644 yuan, up from 3,578 yuan on Tuesday evening. Hot-rolled coil futures also rallied, finishing at 3,450 yuan.
The strength in steel futures helped to fuel gains in bulk commodity contracts traded separately in Dalian.
After being pummeled earlier in the week, iron ore futures spent most of Wednesday’s day session grinding higher, eventually closing at 471.5 yuan, up marginally from 469 yuan on Tuesday evening.
Coking coal and coke contracts also bounced, finishing the session at 1,330 and 2,123 yuan respectively, up from Tuesday’s night session close of 1,314 and 2,102 yuan.
There was very little change on those levels in overnight trade on Wednesday.
SHFE Hot Rolled Coil ¥3,449 , 0.76%
SHFE Rebar ¥3,636 , 0.69%
DCE Iron Ore ¥474.00 , 0.85%
DCE Coking Coal ¥1,335.00 , 1.14%
DCE Coke ¥2,132.00 , 0.66%
The lack of movement provides few clues as to whether the rebound in spot markets will continue into Thursday’s session.
Trade in Chinese commodity futures will resume at midday AEDT.
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