- Iron ore spot markets fell across the board on Friday, pulling back from multi-month highs struck earlier in the week.
- The move appears to have been driven by renewed weakness in steel prices, rather than concerns over the outlook for demand.
- Chinese futures reversed earlier losses in late trade on Friday, pointing to the likelihood that spot markets will begin on a stronger footing today.
Iron ore spot markets weakened across the board on Friday following news the Chinese economy grew at the slowest pace since the GFC in the September quarter.
According to Metal Bulletin, the price for benchmark 62% fines dipped 0.4% to $73.28 a tonne, pulling back from the multi-month high of $73.58 a tonne struck a session earlier.
Low and higher grades also softened during the session.
The price of 58% fines shed 0.9% to settle at $42.59 a tonne. Ore with 65% Brazilian fines fell by a smaller 0.5% to $96.70 a tonne.
The modest bout of profit-taking coincided with news that Chinese GDP grew by 6.5% in the year to September, down from 6.7% in the 12 months to June and expectations for a smaller slowdown if 6.6%.
Curiously, the losses came despite data showing Chinese crude steel output hit the highest levels on record on a per daily basis in September, likely reflecting the impact of high profit margins for Chinese steel mills and output being brought forward ahead of looming production cuts to improve air quality over winter.
Rebar and hot-rolled coil futures traded in Shanghai fell to 4,055 and 3,860 yuan respectively on Friday, down 2.4% and 1.4% from Thursday’s day session close.
The softness in Chinese steel prices flowed through to bulk commodity futures traded separately in Dalian with iron ore, coking coal and coke contracts finishing the session at 515, 1,356 and 2,353.5 yuan respectively, down 1.6%, 2.6% and 3.9% from Thursday’s day session close.
However, after falling across the board earlier in the day, all contracts bounced on Friday evening as steel futures caught a bid.
Here’s the final scoreboard.
SHFE Rebar ¥4,124 , 0.76%
DCE Iron Ore ¥523.00 , 1.36%
DCE Coking Coal ¥1,370.00 , -0.29%
DCE Coke ¥2,372.00 , -0.63%
The reversal followed an “orange” pollution alert issued by China’s Hebei province — the nation’s largest steel-making centre — that forced industrial plants to cut output from Friday to Monday.
Seemingly, the link between movements in steel prices — rather than demand and supply factors — remains the dominant feature in bulk commodity futures at present. The late gains on Friday evening also point to the likelihood that spot markets will open on a stronger footing on Monday.
Trade in Chinese commodity futures will resume at midday AEDT.
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