Iron ore markets edge lower

  • Iron ore spot markets closed mixed on Wednesday with higher grades rising while mid and lower grades fell.
  • Chinese steel prices rose, coinciding with reports that China will shutter more industrial production capacity in the years ahead and the release of reasonable economic data.
  • Chinese rebar and bulk commodity contracts fell in overnight trade. The US is due to slap new tariffs of Chinese imports from Friday.

Iron ore spot markets remain quiet, continuing to ignore the wild swings seen in Chinese stocks and yuan.

However, with iron ore and rebar futures falling in overnight trade on Wednesday, it looks like spot markets may start off on a softer footing today.

According to Metal Bulletin, the spot price for benchmark 62% fines slipped 0.5% to $64.20 a tonne, leaving it at the lowest level in five weeks.

Like the benchmark, modest moves were also seen across the grades.

After bouncing earlier in the week, lower grades came under renewed selling pressure with the price for 58% fines falling 0.8% to $37.16 a tonne.

Higher grades managed to buck the broader trend with the price of 65% fines adding 0.1% to settle at $91.60 a tonne.

The strength in higher-quality, more-efficient ore coincided with a bounce in Chinese steel futures during the session.

Rebar futures in Shanghai finished trade at 3,783 yuan, up from Wednesday’s night session close of 3,769 yuan. It briefly traded above 3,800 yuan earlier in the day.

The bounce followed an announcement from China’s government that it will intensify the closure of outdated and excess steel capacity from this year through 2020 as part of its anti-pollution plan, according to Reuters.

82 cities will be targeted as part of the plan, up from 28 currently.

“Restricting production and closing old capacities in certain areas suggest that the total supply of steel will be quite limited,” a Shanghai-based trader told Reuters.

Sentiment may have also been supported by a faster improvement in China’s composite PMI in June. According to IHS Markit, it rose to 53.0 last month, up from 52.3 in May, leaving it at the highest level since February.

Despite the optimism expressed by rebar traders, that didn’t extend to those trading iron ore and coking coal futures in Dalian.

They finished at 462 yuan and 1,154.50 yuan respectively, marginally below Wednesday’s night session close.

Like rebar contracts, coke futures were assisted by the expansion of industrial closures with the September 2018 contract finishing the day at 2,045 yuan.

Despite the mixed performance earlier in the day, all contracts lost ground in overnight trade.

SHFE Rebar ¥3,753 , -0.82%
DCE Iron Ore ¥455.00 , -1.62%
DCE Coking Coal ¥1,139.50 , -2.06%
DCE Coke ¥2,004.00 , -1.74%

The losses could reflect increased nerves as the introduction of tariffs on $US34 billion worth of Chinese imports into the United States fast approaches.

They’re due to be implemented on July 6, and China has promised to respond with reciprocal tariffs on US imports.

Trade in Chinese commodity futures will resume at 11am AEST.

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