Iron ore's bounce didn't last long

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  • The benchmark iron ore spot price fell heavily on Thursday, completely reversing Wednesday’s 2.3% gain. Lower and higher grades were unchanged, possibly reflecting a lack of market activity.
  • Chinese rebar futures suffered their largest loss since late March on Thursday. From the multi-year peak struck last week, the most actively traded contract has lost 7%.
  • China will release a swathe of PMI reports today. These have often coincided with large gyrations in spot and futures markets in the past.

Iron ore’s latest bounce didn’t last long with the benchmark spot price falling heavily on Thursday, reversing all of Wednesday’s unusually large gain.

According to Metal Bulletin, the price for 62% fines skidded 2.2% to $65.87 a tonne, the largest percentage decline since August 1.

It had gained 2.3% on Wednesday, lifting from $65.87 a tonne. Essentially, for all the volatility over the past two days, the price has gone nowhere from Tuesday.

Hinting that thin market liquidity may be behind the strange price movements, there was no movement across lower of higher grades on Thursday.

The price of 58% fines settled at $36.28 a tonne, 65% fines at $94.50 a tonne.

As opposed to the lack of movement seen across spot markets, there was plenty of action in Chinese steel and bulk commodity futures during the session.

Rebar futures continued to slide, falling for a seventh consecutive session.

The most actively traded January 2019 contract fell 2.5% from Wednesday’s day session close, finishing trade at 4,118 yuan. It was the largest one-day percentage drop since late March, extending its losses from last week to 7%.

It was also below the 4,128 yuan level it closed on Wednesday evening.

Despite the continued slide in steel prices, bulk commodity futures traded separately in Dalian finished mixed.

Coke futures were slammed, sliding to 2,448 yuan, well below Wednesday’s night session close of 2,537.5 yuan.

However, iron ore and coking coal contracts managed to buck the broader downdraft, finishing the session at 484.5 and 1,253.5 yuan respectively. The closed at 478.5 and 1,250.5 yuan respectively on Wednesday evening.

Continuing the theme established earlier in the session, futures markets finished mixed in overnight trade on Thursday with iron ore bid while all contracts were largely unchanged.

Here’s the closing scorecard.

SHFE Rebar ¥4,117 , -0.34%
DCE Iron Ore ¥489.50 , 1.77%
DCE Coking Coal ¥1,252.00 , 0.28%
DCE Coke ¥2,442.00 , -2.44%

Trade in all Chinese commodity contracts will resume at 11am AEST, the same time the Chinese government will release manufacturing, non-manufacturing and steel industry PMI reports for August.

In the past these have often lead to unusually large moves in spot and futures markets, especially the steel PMI.

As such, the moves in futures markets on Thursday may not provide the best indication as to what direction markets will move today.

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