Iron ore was immune to the selloff in other commodity markets

Coope/BIPs/Hulton Archive/Getty ImagesTeflon coated.
  • Iron ore spot markets rose across the board on Tuesday, a resilient performance given widespread losses across the broader commodities complex.
  • The strength in spot markets was mirrored in futures, and was undoubtedly helped by a rebound in Chinese steel prices during the session.
  • IHS Markit will release China’s services PMI report on Wednesday.

Iron ore spot markets rose across the board on Tuesday, bucking the the trend seen across the broader commodity complex.

A rebound in steel prices after several weeks of selling appears to have been the catalyst.

According to Metal Bulletin, the price for benchmark 62% fines rose 0.9% to $66.62 a tonne, leaving it at a one-week high.

The benchmark has now moved in the opposite direction to the day before in each of the past four sessions.

Choppy, huh?

Gains were also seen across lower and higher grades during the session.

58% fines rose 0.8% to $37.63 a tonne while 65% fines rose by a smaller 0.2% to settle at $95.10 a tonne.

The gains in spot markets mirrored a modest bounced in futures markets earlier in the day, a move undoubtedly supported by strength in Chinese steel futures traded in Shanghai.

The January 2019 rebar contract finished the session at 4,115 yuan, above Monday’s night session close of 4,083 yuan. It had fallen every day since late August.

The strength in steel markets may have been helped by renewed concern over the outlook for supply.

The Hebei Metallurgical Industry Association’s steel PMI dipped to 48.8 in August, according to Reuters, its third straight month below the 50 level that signals a deterioration in activity levels.

The group said falling output and decreasing exports drove the weakness last month.

“Due to escalated environmental curbs, steel production continued to be restrained,” the group said in a statement.

“We expect output curbs may be strengthened in steel sectors while demand in downstream sectors will generally be positive.”

Hebei is a northern Chinese province renowned for heavy industry, including being home to Tangshan, the nation’s top steel making city.

Hot rolled coil futures also advanced which, along with rebar, helped to boost bulk commodity contracts traded in Dalian.

Iron ore futures finished trade at 488.5 yuan — four yuan higher than Monday’s night session close — while coke and coking coal both rebounded after tumbling on Monday, finishing the day at 1,227 and 2,381 yuan respectively.

As seen in the scoreboard below, there was very little movement in Chinese futures in overnight trade on Tuesday.

SHFE Rebar ¥4,115 , 0.17%
DCE Iron Ore ¥487.00 , 0.52%
DCE Coking Coal ¥1,233.00 , 0.49%
DCE Coke ¥2,419.00 , 2.39%

The limited moves provide few clues as to what direction spot markets will move on Wednesday.

Trade in futures markets will resume at 11am AEST, 45 minutes before the release of the China services PMI for August from IHS Markit.

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