Iron ore spot markets continued to weaken on Wednesday, mirroring another slide in Chinese bulk commodity futures seen earlier in the session.
The spot price for benchmark 62% fines fell by 0.3% to $77.40 a tonne, according to pricing from The Steel Index, adding to the 2.4% slide recorded on Tuesday.
Weaker demand for steel product, leading to a continued rise in Chinese iron ore inventory levels, was cited as one factor that contributed to the decline.
“The pullback results from the big amount of inventory, whereas the downstream market is not active,” Liu Xinwei, steel analyst at China Sublime Information Group, told Reuters.
Domestic stockpiles currently sit at the highest levels seen since mid-2014, increasing by a further 90,000 tonnes last week to almost 11 million tonnes.
That inventory build corresponded with a sharp deterioration in activity levels across China’s steel industry in December.
China official steel PMI dropped to 47.6 last month, following two months of gains, with output contracting sharply as production curbs implemented by regulators due to environmental concerns started to bite.
According to data from the China Iron and Steel Association (CISA), average steel production from member mills between 11-20 December was 1.656 million tonnes, down 3.3% on the levels seen in early December.
According to Macquarie Research, this was the lowest rate seen since late July last year.
Despite the weakness in spot markets amidst a lack of supportive fundamental factors, Chinese iron ore futures rebounded overnight, mirroring a similar move seen in coking coal, coke and rebar futures.
The most actively traded May 2017 contract finished the session at 547 yuan, an increase of 1.48%.
Other steel-linked contracts added between 1.45% to 1.82%, with the gain coming after many contracts hit multi-week lows earlier in the session.
Trade in Chinese commodity futures will resume at Midday AEDT.