Iron ore futures have gone into reverse

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  • Iron ore markets rise as Chinese steel prices rally
  • Speculation over further production curbs in China support steel prices
  • Futures fell overnight, after US announced a 25% tariff on steel imports

Iron ore spot markets rebounded on Thursday as Chinese steel prices rose.

But with futures down heavily overnight, the early signs suggest the move may not last.

According to Metal Bulletin, the spot price for benchmark 62% fines jumped 1% to $79.39 a tonne, leaving it at a fresh six-month high.

Both higher and lower grades rose during the session.

Ore with 65% Fe content added 0.5% to settle at $95.40 a tonne. The price of 58% fines fared a little better, rising 1% to $44.55 a tonne.

The rebound in spot markets coincided with further strength in Chinese rebar futures during the session.

The May 2018 contract in Shanghai closed up 0.3% at 4,032 yuan a tonne, having earlier hit a high of 4,062 yuan a tonne, the loftiest level since early December.

Prices were supported by speculation that more Chinese cities may announce curbs on steel production, following the lead of Tangshan earlier this week.

Tangshan accounts for around 12% of China’s total annual steel output.

“Tangshan itself may not have a big impact on supplies, but other regions are likely to take similar measures, so market sentiment is positive for now,” a senior research manager with a trading firm in Hangzhou told Reuters.

Rather than being seen as a headwind for demand as has been the case in the past, there was little reaction in iron ore futures during the session.

The May 2018 contract in Dalian closed up 0.3% at 544.5 yuan.

In contrast, coke and coking coal futures weakened a little, closing at 2,258.5 yuan and 1,401 yuan respectively.

However, as seen in the scoreboard below, all contracts lost ground in overnight trade.

SHFE Rebar ¥3,997 , -0.97%
DCE Iron Ore ¥537.50 , -1.19%
DCE Coking Coal ¥1,378.50 , -1.68%
DCE Coke ¥2,232.00 , -0.91%

The reversal followed news on Thursday that the United States will slap a 25% tariff on all steel imports.

Futures markets closed overnight before the actual announcement, but reports earlier in the session indicated that the move was coming.

Chinese exports account for just 2% of total US imports, suggesting that the impact on China’s steel industry will be negligible. Much will be determined by whether the US actions spark even higher trade tariffs in other nations for imported steel product.

Trade in Chinese futures will resume at midday AEDT.

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