Iron ore tumbles as tariff deadline looms

Ian MacNicol/ Getty ImagesIan MacNicol/ Getty Images
  • The benchmark iron ore spot price tumbled to the lowest level since June 28 on Thursday.
  • The slide came despite modest strength in Chinese steel and iron ore futures during the session.
  • The United States looks set to introduce tariffs on $US34 billion worth of Chinese imports from 2pm AEST today. China has promised to respond to the move by introducing the same level of tariffs on US imports.

Iron ore has fallen to a fresh multi-month low.

According to Metal Bulletin, the spot price for benchmark 62% fines tumbled 1.7% to $63.14 a tonne, coming within a whisker of hitting a seven-month low.

It currently sits at the lowest level since March 28.

The moves across higher and lower grades were more muted than in the benchmark.

The price of 58% fines slipped 0.3% to $37.05 a tonne. In contrast, 65% fines was unmoved, holding steady at $91.60 a tonne.

The flat-to-lower outcomes came despite strength in Chinese steel futures during the session.

Rebar futures in Shanghai finished at 3,788 yuan, up from Wednesday’s night session close of 3,753 yuan.

On Wednesday, China’s government announced that it will continue to shutter outdated and excess steel capacity from this year through to 2020 as part of its anti-pollution plan, helping to underpin steel prices.

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

Despite potentially limiting demand for steel’s raw ingredients, iron ore, coking coal and coke contracts all recovered from early losses to close marginally higher for the session.

The September 2018 iron ore contract finished trade at 456.50 yuan having fallen to as low as 452 yuan earlier in the day. It closed Wednesday’s night session at 455 yuan.

Coking coal and coke futures also reversed earlier losses, finishing trade at 1,150.50 yuan and 2,012 yuan respectively, up from 1,139.5 yuan and 2,004 yuan on Wednesday evening.

As seen in the scoreboard below, there was very change on those closing levels in overnight trade.

SHFE Rebar ¥3,786 , 0.32%
DCE Iron Ore ¥458.50 , 0.66%
DCE Coking Coal ¥1,148.00 , 0.39%
DCE Coke ¥2,010.00 , 0.00%

Chinese commodity futures will reopen at 11am AEST, three hours before proposed US tariffs on $US34 billion worth of Chinese imports are due to kick in. The tariffs will eventually be extended to $US50 billion worth of imports.

China has promised to retaliate by implementing the same amount of tariffs on US imports.

US President Donald Trump has pledged to announce additional tariffs on $US200 billion worth of Chinese imports should China retaliate, and potentially $US200 billion more should China respond to that move.

It’s going to be not only an interesting day ahead, but period ahead, for markets.

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