- Iron ore prices closed mixed on Monday.
- A cyclone in Western Australia will impact Australian iron ore supply. However, Chinese steel prices fell, placing pressure on bulk commodity prices.
- There have been further reports of further iron ore supply disruptions in Brazil in recent hours.
Iron ore prices finished mixed on Monday as news of supply disruptions in Australia was likely counteracted by weakness in Chinese steel futures.
According to Metal Bulletin, the spot price for benchmark 62% fines slipped by 0.2% to $85.81 a tonne, partially reversing the 1.7% surge seen a session earlier.
Lower grade ore also fell with 58% fines slumping 1% to $69.35 a tonne, giving back all of the gains achieved in the previous two sessions.
Higher grade ore managed to buck the broader trend with 65% fines edging up 0.1% to $96.40 a tonne, leaving it at a one-week high.
The mixed price performance came despite news of disruptions to iron ore operations in Western Australia as a result of Tropical Cycle Veronica. Rio Tinto, BHP and Fortescue Metals all said operations had been disrupted in some form from the weather system.
Veronica is currently located northwest of Dampier on Australia’s Pilbara coastline, and is tracking in a Westerly direction as a category one system. That means its not only weakening but moving further away from where the vast majority of iron ore facilities and infrastructure is located.
Like spot markets, Chinese iron ore markets were quiet to start the week, giving up earlier gains to finish marginally lower.
The May 2019 contract in Dalian edged down to 611 yuan, down from Friday’s night session close of 615 yuan.
Coking coal and coke futures also softened, falling to 1,233 and 1,973.5 yuan respectively, down from 1,241.5 and 1,987 yuan on Friday evening.
Helping to explain why bulk commodity contracts weakened, steel futures in Shanghai lost further ground during the session.
The most actively traded rebar and hot-rolled coil futures slipped to 3,692 and 3,659 yuan respectively, below Friday’s night session close of 3,747 and 3,685 yuan.
Lower steel prices weigh on Chinese steel mill profit margins, and often results in downside pressure on prices for its raw ingredients. Output restrictions on Chinese industrial activity over winter, including steel production, will also conclude at the end of March, an outcome that will likely see Chinese steel output increase from current levels.
While weakness in steel futures may have contributed to the weakness in bulk commodity contracts earlier in the day, those moves were partially reversed in overnight trade on Monday, likely explaining the modest increase seen in iron ore futures during the session.
SHFE Hot Rolled Coil ¥3,670 , -0.43%
SHFE Rebar ¥3,710 , -0.56%
DCE Iron Ore ¥616.00 , 0.33%
DCE Coking Coal ¥1,231.50 , -0.61%
DCE Coke ¥1,971.50 , -0.60%
Iron ore price may have also been helped by news of further supply disruptions in Brazil.
According to Reuters, a Brazilian court has ordered mining giant Vale to halt operations at 13 tailings dams within its Brucutu mining complex, delaying the restart of iron ore production at the facility.
Vale was granted permission to restart operations at Brucutu having been previously suspended since early February following a deadly mining disaster at a separate mine it operated in late January.
Recently, speculation over potential supply disruptions has been influential on movements in both iron ore spot and futures markets.
Trade in Chinese commodity futures will resume at midday AEDT.
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